In the days before health care reform, the IRS permitted employers to determine the maximum amount an employee could set aside tax-free in a Flexible Spending Account. But that was then, and this is now.

Going forward, employers will need to enforce a $2,500 annual limit on all employee healthcare FSA contributions.

The Patient Protection and Affordable Care Act also changed the definitions of qualified medical expenses (for FSAs, HSAs, and HRAs) to bring them in-line with the definition used for the medical expenses tax deduction, an itemized deduction, which excludes tax-free reimbursements for over-the-counter drugs not prescribed by a physician.

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Robert Bloink

Robert Bloink, Esq., LL.M., has taught at the Texas A&M University School of Law and the Thomas Jefferson School of Law; in the past decade, Bloink has initiated $2B+ in insurance & alternative asset class portfolios, and previously served as a senior attorney in the IRS Office of Chief Counsel for the Large- and Mid-Sized Business Division. Bloink is also the co-author of Tax Facts, a reference solution that helps to answer critical tax questions and provides the latest tax developments.