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Regulatory alert and legislative updates

IRS announces 2023 limits for flexible spending accounts (FSAs), commuter benefits and adoption assistance.

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On October 19, 2022, the IRS announced the maximum 2023 plan contribution limits for health care FSAs, commuter benefits and adoption assistance. For the 2023 plan year, limits are as follows:

Health care FSA$2,850$3,050$200
Health care FSA carryover$570$610$40
Adoption assistance$14,890$15,950$1,060
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Important details:

  • If you provide health care FSA employer contributions, this amount is in addition to the amount that employees can elect to contribute. Employees can elect up to the IRS limit and still receive the employer contribution.
  • The health care FSA carryover is effective for the amount carrying over from a plan year beginning in 2023 to the following plan year. So, a plan ending December 31, 2022, would only be able to allow $570 to be carried over to the 2023 plan year. Any amount that rolls over into the 2023 plan year does not affect the maximum limit that employees can contribute.
  • There is no change to the dependent care FSA limit for 2023, which is $5,000 per year, if married and filing a joint return or a single parent, or $2,500 per year per parent if married and filing separately.
  • We’re working to update open enrollment materials to reflect these increases.

Employees will value the additional cost savings they can gain from these increases. Since they don't pay taxes on health care FSA funds, they'll save on every dollar added to their account — in some cases giving employees a 30% discount.* And, if you offer commuter benefits, your employees are now able to save even more with the increased monthly expense amount for work-related commuting costs. We’re working to bring clarity and confidence to expenses so your employees can better plan for and take control of their healthcare finances.

For more information, read the IRS announcement at IRS.gov.**

*Assuming a 22% federal income tax and 7.65% FICA. Results and amount will vary depending on your particular circumstances.
**IRS.gov is governed under separate privacy and website policies, which are available for review on their site.