On May 16, 2023, the IRS released Revenue Procedure 2023-23 to provide the inflation-adjusted limits for health savings accounts (HSAs) and high deductible health plans (HDHPs) for 2024. The IRS is required to publish these limits by June 1 of each year.
These limits include:
The IRS has finally announced adjustments to 2023 contribution limits on various tax-advantaged health and dependent care spending accounts, retirement plans, and other employee benefits such as adoption assistance and transportation benefits. Many of these contribution limits, though not all, are indexed to cost-of-living adjustments.
Together, these combined announcements by the IRS detail 2023 adjusted limits to the amounts employees can tuck away pretax into Flexible Spending Accounts (FSAs), Health Savings Accounts (HSAs), transportation benefits, and retirement plans such as 401(k)s.
While IRS limits for HSAs and HDHPs are required, by law, to be announced by June 1st, limits for these other pretax savings vehicles always seem to come so late in the year that many employers have already completed their employee benefits open enrollments.
Employers who have already completed open enrollment for 2023 have two choices when it comes to communicating these updates; 1) they can do nothing, since there isn't an obligation to make the maximum election amounts available to employees, or 2) they can reopen the enrollment process and let employees who want to increase their elections do so before December 31st, for calendar year plans.
What follows is a consolidated summary of the new IRS limits;
The IRS has finally announced adjustments to 2022 contribution limits on various tax-advantaged health and dependent care spending accounts, retirement plans, and other employee benefits such as adoption assistance and transportation benefits. Many of these contribution limits, though not all, are indexed to cost-of-living adjustments.
Together, these combined announcements by the IRS detail 2022 adjusted limits to the amounts employees can tuck away pretax into Flexible Spending Accounts (FSAs), Health Savings Accounts (HSAs), transportation benefits, and retirement plans such as 401(k)s.
While IRS limits for HSAs and HDHPs are required, by law, to be announced by June 1st, limits for these other pretax savings vehicles always seem to come so late in the year that many employers have already completed their employee benefits open enrollments.
Employers who have already completed open enrollment for 2022 have two choices when it comes to communicating these updates; 1) they can do nothing, since there isn't an obligation to make the maximum election amounts available to employees, or 2) they can reopen the enrollment process and let employees who want to increase their elections do so before December 31st, for calendar year plans.
What follows is a summary of the new IRS limits;
The IRS recently finalized adjustments to 2021 contribution limits on various tax-advantaged health and dependent care spending accounts, retirement plans, and other employee benefits such as adoption assistance and qualified transportation benefits. Many of these contribution limits, though not all, are indexed to cost-of-living adjustments.
Together, these annual announcements by the IRS detail any adjusted limits to the amounts employees can tuck away pretax into Flexible Spending Accounts (FSAs), Health Savings Accounts (HSAs), Commuter Benefits, and Retirement Plans such as 401(k)s for the upcoming year.
While IRS limits for HSAs are required, by law, to be announced by June 1st, limits for these other pretax savings vehicles always seem to come so late in the year that many employers have already completed their employee benefits open enrollments.
As frustrating as this is, employers would be well-served to get this information out to their employees so they can take full advantage of these pretax savings vehicles. That said, there are not all that many changes for 2021.
What follows is a summary of limits employers and employees need to know.
This afternoon the IRS officially announced the final 2020 election/contribution limits for Flexible Spending Accounts (FSAs), qualified Commuter Benefits, and several retirement savings vehicles. (See comparison tables, below.)
Considering that many employers have already held their employee benefits Open Enrollments for 2020, today’s announcements by the IRS can best be filed under the “better late than never” category.
These IRS statements finally set official contribution limits for Health Care FSAs, Dependent Care FSAs, Limited Purpose FSAs, Qualified Parking and Qualified Transportation Saving Plans, 401(k)s, 403(b)s, most 457 plans, IRAs, SIMPLE Plans, and the Federal Government’s Thrift Savings Plan.
All of these saving plans provide participants with the opportunity to save money, either by paying for qualified expenses with pre-tax savings contributions, or by saving for retirement with pretax elections.
An increasing number of married employees are obtaining health insurance coverage through their own plans rather than their working spouses’.
Regardless of whether this reflects sound economic strategy (depending on employer contributions), personal preference, or is the result of spousal carve-outs instituted by employers as a cost-mitigation strategy, having two working spouses each go on their own individual high-deductible health plans (HDHP) increases the chance of overfunding health savings accounts (HSAs). This is not unlike the situation some married couples find themselves in when they accidentally overfund their Dependent Care FSA by each accidentally maxing out their contributions through their individual employers.
Unlike last year when the IRS adjusted HSA contribution limits multiple times during the year, the 2019 HSA contribution limits are set and fairly straightforward. They are as follows:
These represent a $50 increase for individuals and a $100 increase for families compared to last year’s numbers. The catch-up limit has remained unchanged. (All of these figures include both employer and employee contributions.)
When just one person is contributing to an HSA, these limits are easy to apply. A bank representative can explain the account to them and help them make contributions that don't exceed the applicable limit.
In situations that involve two spouses, however, staying within the contribution limit becomes a little more involved.
For many who work in human resources and employee benefits, open enrollment can be a stressful time of year. Focused on meeting tight deadlines and pleasing multiple stakeholders, many HR professionals often repeat sins of the past and fail to make annual, incremental improvements in their open enrollment processes.
Optimizing your open enrollment is critical to ensuring its ongoing success. After all, over time you learn more about how best to communicate with your organization, particularly as the employee benefits space evolves i.e. new benefit products and services, and new technologies.
In the spirit of continuous improvement, whether you're working off of a well-established checklist or with your employee benefits broker, be sure to avoid these common pitfalls during your next open enrollment.
Procrastinating employees will inevitably have last minute questions and may experience technology troubles. Make sure your deadline for open enrollment falls during the workweek and during normal office hours when your HR staff is still on duty to help them through those final steps in the process.
Often times your employee is not the only one weighing-in on benefit decisions. Make sure the communication materials and media channels you're using reach other heads of household and key decision makers such as spouses. Consider extending invitations to open enrollment meetings to the entire family.
