The maximum amount an employee can contribute to a health care FSA is set by the employer as long as it does not exceed the Internal Revenue Service (IRS) maximum of $3,050 for the 2023 plan year. The IRS maximum is indexed to the consumer price index annually to account for changes in the cost of living.
The maximum amount an employee can contribute to a dependent care FSA is set by the employer as long as it does not exceed the IRS maximum which is $5,000 a year for individuals or married couples filing jointly, or $2,500 for a married person filing separately. Married couples have a combined $5,000 limit, even if each has access to a separate FSA through his or her employer. The dependent care FSA maximum is set by statute and is not subject to inflation-related adjustments.
An employer should advise employees to plan and allocate funds carefully because any unused funds that remain in the account at year end are forfeited unless the plan allows for carry-overs or a grace period. See What options does an employer have with unused FSA funds?
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