2023 Annual Limits Announced

The IRS recently released inflation-adjusted limitations that apply to various employee benefits in 2023.

Medical FSA Limitation and Maximum Carryover Amount for 2023

The IRS recently announced the revised dollar limitation on employee salary reduction contributions to a medical FSA, and the revised maximum medical FSA carryover amount.  For 2022, the employee salary reduction contribution dollar limitation was $2,850.  For 2023, the limitation will be $3,050.  Additionally, for 2022, the maximum carryover amount was $570.  For 2023, the maximum carryover amount will be $610.

Adoption Assistance Dollar Limitations for 2023

The IRS also recently announced increases in the dollar limits that apply to adoption assistance benefits in 2023. For tax years beginning in 2023, the maximum amount that can be excluded from an employee’s gross pay for the adoption of a child with special needs is $15,950, up from $14,890 in 2022.  For tax years beginning in 2023, the limit is also $15,950 for amounts paid or expenses incurred by an employer under an adoption assistance program.

Retirement Plan Dollar Limitations for 2023

The IRS also recently released the dollar limits that will apply to retirement plans during 2023.  Here are some of the more important limits:

Elective Deferral Limit for 401(k), 403(b) and 457 Plans

2022 Limit:  $20,500
2023 Limit:  $22,500

Catch-Up Contribution Limit for 401(k), 403(b) and 457 Plans

2022 Limit:  $6,500
2023 Limit:  $7,500

Maximum Compensation Limit for Qualified Retirement Plans

2022 Limit:  $305,000
2023 Limit:  $330,000

Annual Additions Limit for Defined Contribution Plans

2022 Limit:  $61,000
2023 Limit:  $66,000

Annual Benefit Limit for Defined Benefit Plans

2022 Limit:  $245,000
2023 Limit:  $265,000

Annual Compensation for Classification of Highly Compensated Employees

2022 Amount:  $135,000
2023 Amount:  $150,000

Note:  An employee is a highly compensated employee (HCE) based upon the employee’s compensation during the prior plan year.  Therefore, in determining whether an employee is an HCE for a plan year beginning during 2023, the participant’s compensation during the 2022 plan year and the compensation limit for the 2022 plan year are used.

Annual Compensation for Classification of a Key Employee

2022 Limit:  $200,000
2023 Limit:  $215,000

HSA Dollar Limitations for 2023

The IRS also recently announced increases in the dollar limits that apply to HSAs in 2023:

Annual HSA Contribution Limit

2022 Limit:  $3,650 for self-only ($7,300 for family) HDHP coverage
2023 Limit:  $3,850 for self-only ($7,750 for family) HDHP coverage

HSA Catch-Up Contribution Limit (for individuals age 55 or older)

2022 Limit:  $1,000
2023 Limit:  $1,000 (unchanged)

Minimum Annual HDHP Deductible

2022 Limit:  $1,400 for self-only ($2,800 for family) HDHP coverage
2023 Limit:  $1,500 for self-only ($3,000 for family) HDHP coverage

Maximum HDHP Out-of-Pocket Expense Limit

2022 Limit:  $7,050 for self-only ($14,100 for family) HDHP coverage
2023 Limit:  $7,500 for self-only ($15,000 for family) HDHP coverage

Qualified Transportation Fringe Benefit Dollar Limitations for 2023

The IRS also recently announced increases in the dollar limits that apply to Qualified Transportation Fringe Benefits in 2023. For tax years beginning in 2023, the monthly limit for transportation in a commuter vehicle and/or transit passes is $300, up from $280 in 2022. The monthly limit for qualified parking benefits is also $300 per month for 2023, up from $280 in 2022.

Social Security Taxable Wage Base for 2023

The Social Security Administration recently announced that the maximum amount of earnings subject to Social Security tax will increase from $147,000 to $160,200 in 2023.

If you have any questions, please contact a member of the Miller Johnson employee benefits practice group.