IRS Announces Increased Limit for Certain Employee Benefits

2-Minute Read

10/24/22

Each year, just as the leaves turn to the fiery shades of autumn, the Internal Revenue Service (IRS) announces how much more “green” will be available during the coming year under various employee benefit programs. The IRS recently released Revenue Procedure 2022-38 in which it has updated many key employee benefit limits based on annual inflation or cost-of-living adjustments. The good news is that recent higher inflation trends have led to the IRS providing for higher-than-typical increases in both the amount that individuals can contribute to a health flexible spending arrangement (HFSA), as well as the amount they can carry over in a plan including that feature.

Effective for tax years beginning in 2023, the following higher limits will apply:

• Section 125 HFSA individual deferral contribution: $3,050/year
• Section 125 HFSA maximum permitted carryover amount: $610
• Section 132 qualified transportation fringe benefits: $300/month
• Section 137 adoption assistance program expenses: $15,950/year (subject to phase out for individuals with adjusted gross income starting at $239,230)
• Section 9831 qualified small employer health reimbursement arrangement (QSEHRA): $5,850/year ($11,800/year for family coverage)

Employers should keep the adjusted limits handy as they prepare for 2023 and communicate with their employees regarding various benefit options.

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This information is general and is provided for educational purposes only. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors.