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QUESTION: We inadvertently allowed an employee to make health FSA salary reductions that exceed the Code’s limit. Will this cause our cafeteria plan to lose its tax-advantaged status? ANSWER: The general rule is that a cafeteria plan will lose its tax-advantaged status if it fails to comply with the annual limit on health FSA salary reductions ($2,750 for plan years beginning in 2020 or 2021).
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