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IRS Releases 2023 Welfare Benefit Plan Limits

by | Oct 26, 2022 |

The IRS has released Revenue Procedure 2022-38, which sets forth the 2023 inflation-adjusted limits for certain employee welfare benefit plans and the dollar amounts used for certain discrimination tests.

Health Flexible Spending Accounts (“FSAs”). The 2023 limit for employee salary reduction contributions to health flexible spending accounts increases by $200 to $3,050.  If a cafeteria plan permits the carryover of unused Health FSA amounts, the maximum permitted carryover amount increases by $40 to $610.

Dependent Care FSAs. The dependent care FSA maximum annual contribution limit is not indexed for inflation and did not change for 2023. The maximum tax-exempt benefit from a dependent care assistance plan remains at $5,000 ($2,500 if married and filing separately).

Transportation and Parking. For 2023 the qualified transportation benefit limit for transit passes and for qualified parking increases by $20 to $300 per month. As a reminder, under IRS guidance (IRS Letter 2020-0024) commuter plans can allow transit pass amounts to be rolled over to a qualified parking balance (and vice versa).

Health Savings Accounts (“HSAs”).  The IRS previously released (in Rev. Proc. 2022-24) the inflation-adjusted limits related to HSAs and high deductible health plans (“HDHPs”) for calendar year 2023. The HSA contribution limit for a self-only HSA is $3,850 (a $200 increase from calendar year 2022) and $7,750 for a family HSA (a $450 increase from calendar year 2022).

To qualify as a HDHP in 2022, a plan must have a minimum annual deductible of at least $1,500 for self-only coverage (a $100 increase from 2022), and $3,000 for family coverage (up $200 from 2022). The maximum out-of-pocket expenses permitted for an HDHP is $7,500 for self-only coverage (a $450 increase) and $15,000 for family coverage (a $900 increase).

Highly Compensated Employee.  “Highly compensated employees” must be determined for several welfare plan nondiscrimination tests. For the 2023 plan year, the IRS has previously announced that, for these purposes, an employee who earns more than $150,000 in 2022 (a $15,000 increase from 2022) is a highly compensated employee.

Revenue Procedure 2022-38 can be found at: