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Article | Insider

2023 inflation-adjusted limits announced for a range of employee benefit plans

By Cindy Brockhausen , Gary Chase and Kathleen Rosenow | November 3, 2022

The 2023 tax-related limits potentially affect the design, administration, communication and tax reporting for retirement and benefit-related plans.
Benefits Administration and Outsourcing Solutions|Health and Benefits|Retirement
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On October 18, 2022, the IRS released Revenue Procedure 2022-38 containing the 2023 tax-year inflation adjustments for a number of income tax provisions, including health flexible spending arrangements, qualified transportation fringe benefits, qualified adoption assistance programs and eligible long-term care premiums. Revenue Procedure 2022-38 also includes the indexed dollar amounts for the federal income tax-related standard deduction.1

On October 21, 2022, the IRS released Notice 2022-55, which includes the qualified retirement plan limits for 2023. These limits restrict the contributions that can be made to, and benefits that can be paid from, qualified retirement plans as well as the compensation that can be used when determining benefits.

The table below includes these limits, along with the Social Security maximum taxable wage base that was announced on October 13, 2022, and the limits relevant to health savings accounts and excepted-benefit health reimbursement arrangements that were released earlier this year in Revenue Procedure 2022-24.

The 2023 tax-related limits potentially affect the design, administration, communication and tax reporting for retirement and benefit-related plans.

2022 2023
Health flexible spending arrangements (health FSAs)
(general and limited purpose)
Maximum annual health FSA salary reduction contribution $2,850 $3,050
Maximum annual health FSA carryover of unused amounts from the prior plan year for plans that permit carryover $570 $610
Qualified transportation fringe benefits
Monthly limitation amounts
- Transit pass and commuter highway vehicle (combined) $280 $300
- Qualified parking $280 $300
Qualified adoption assistance
Maximum per adoption income tax exclusion
- Child with special needs (regardless of actual expenses) $14,890 $15,950
- Other adoptions $14,890 $15,950
Adjusted gross income (AGI) tax exclusion phaseout
- Phaseout begins $223,410 $239,230
- Phaseout complete $263,410 $279,230
Dependent care assistance (including FSAs)*
Maximum annual dependent care assistance benefit
- Individual or a married couple filing jointly $5,000 $5,000
- Married individual filing separately $2,500 $2,500
Qualified retirement plan limits
Maximum recognizable compensation $305,000 $330,000
Highly compensated employee (HCE) $135,000 $150,000
Section 415 benefit limits
- Defined benefit plans $245,000 $265,000
- Defined contribution plans $61,000 $66,000
Limit on pretax elective deferrals
- Under age 50 $20,500 $22,500
- Age 50 and over $27,000 $30,000
Qualifying longevity annuity contract (QLAC)
Investment limit $145,000 $155,000
Social Security taxable wage base
Taxable wage base $147,000 $160,200
Eligible long-term care (LTC) premiums
Annual limitation on LTC premiums includible as medical care
Age before close of tax year
- 40 or under $450 $480
- 41 to 50 $850 $890
- 51 to 60 $1,690 $1,790
- 61 to 70 $4,510 $4,770
- More than 70 $5,640 $5,960
Standard deduction
Filing status
- Married individuals filing jointly $25,900 $27,700
- Heads of households $19,400 $20,800
- Unmarried individuals $12,950 $13,850
- Married individuals filing separately $12,950 $13,850
Health savings accounts (HSAs)
Individual coverage
- Maximum annual HSA contribution $3,650 $3,850
- Minimum annual deductible for high-deductible health plan (HDHP) $1,400 $1,500
- Maximum annual out-of-pocket expenses for HDHP $7,050 $7,500
Family coverage
- Maximum annual HSA contribution $7,300 $7,750
- Minimum annual deductible for HDHP $2,800 $3,000
- Maximum annual out-of-pocket expenses for HDHP $14,100 $15,000
Catch-up contributions**
(for individuals attaining age 55 by December 31 until enrolled in Medicare)
$1,000 $1,000
Excepted-benefit HRAs (EB-HRAs)
- Maximum amount employers can contribute $1,800 $1,950

* The dependent care assistance limits under the tax code are not adjusted for inflation; any change would require statutory amendment.
** The HSA catch-up contribution amount for participants attaining age 55 by December 31 of the tax year is not adjusted for inflation; any change would require statutory amendment.

Footnote

1 Revenue Procedure 2022-38 also contains the federal income tax rate tables for 2023.

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Authors


Associate – Research

Director, Retirement and Executive Compensation

Senior Regulatory Advisor, Health and Benefits

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