On October 18, 2022, the IRS released its annual Revenue Procedure, Rev. Proc. 2022-38, setting forth various cost of living adjustments for a variety of tax-related dollar limits, including numerous limits applicable to health and welfare benefits and benefit plans. A related IRS News Release is available at IRS provides tax inflation adjustments for tax year 2023 | Internal Revenue Service.
For 2023, because inflation is at near-record levels, the increases are fairly significant as contrasted with prior years.
Health and Welfare Adjusted Limits for 2023.
The most frequently encountered health and welfare-related dollar limits covered under Rev. Proc. 2022-38, that will increase in 2023 from the parallel dollar limits that are in effect for 2022, are as follows:
- Health FSAs. The dollar limit for employee salary reduction contributions made to Health FSAs is increased from $2,850 in 2022 to $3,050 in 2023.
- For plans that permit the carryover of unused amounts, the maximum amount that can be carried over to the next (i.e., 2024) plan year is increased from $570 in 2022 to $610 in 2023.
- QSEHRAs. The dollar limit for the total amount of payments and reimbursements for any year under a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) is increased (i) from $5,450 in 2022 to $5,850 in 2023, for self-only coverage; and (ii) from $11,050 in 2022 to $11,800 in 2023, for family coverage.
- Qualified Transportation Fringe Benefits. The dollar limit on the amount that may be excluded from an employee’s Income for both (i) qualified parking benefits; and (ii) transit passes and vanpooling expenses (combined) is increased from $280 in 2022 to $300 in 2023.
- Adoption Assistance Programs. The maximum adoption credit allowed to an individual for the adoption of a child is increased from $14,890 in 2022 to $15,950 in 2023. Similarly, the maximum amount that may be excluded from an employee’s gross income under an employer-provided adoption assistance program for the adoption of a child is increased from $14, 890 in 2022 to $15,950 for 2023.
- NOTE: Both the credit and the exclusion will begin to be phased out for individuals with modified adjusted gross incomes greater than $239,230, and will be entirely phased out for individuals with modified adjusted gross incomes of $279,230 or more.
Other Adjusted Limitations for 2023.
In addition to the above limits, Rev. Proc. 2022-38 addresses somewhat less commonly encountered limits relative to DCAPS, Premium Tax Credits, Small Business Health Care Tax Credits, Archer MSAs, and various other items. See the text of the Rev. Proc. and/or the corresponding News Release for full details.
ComplianceDashboard Limits Chart.
See our Geek out page Limits & Annual Fees for an updated chart that includes the major health and welfare plan limits for 2023 (including limits not covered under Rev. Proc. 2022-38), along with the corresponding limits in effect during 2022 and 2021.
Plan administrators, Human Resources personnel, payroll managers, and others affected by the adjusted limits should make sure that their systems are timely updated to reflect the 2023 changes, and to inform employees about the new 2023 dollar limits in all relevant communications (for example, year-end open enrollment materials). Summary plan descriptions (“SPDs”), plan guidelines and procedures, and similar documents also will need to be reviewed and revised, as required.
The information and content contained in this blog post are for general informational purposes only, and does not, and is not intended to, constitute legal advice. As always, for specific questions concerning your health and welfare plan, or for help in operating your plan during the current COVID-19 crisis, please consult your own ERISA attorney or professional advisor.