IRS Releases 2023 Inflation Adjustments for FSAs, HDHPs, and Other Arrangements

The IRS has issued Revenue Procedure 2022-38, listing certain tax inflation adjustments for a wide variety of benefits arrangements, including health FSA contribution limits, HDHP limits, qualified transportation and parking benefits, qualified small employer health reimbursement arrangements (QSEHRAs), the small employer health insurance credit and other adjustments for the 2023 tax year. These adjustments are outlined below:

Health FSAs – For plan years beginning in 2023, the dollar limit for contributions to health flexible spending arrangements increases to $3,050 (up from $2,850 in 2022). For plans that permit the carryover of unused amounts, the maximum carryover amount is $610, an increase of $570 from 2022.

Clarification:  High Deductible Health Plans (HDHPs) applicable ONLY to Archer Medical Savings Accounts– For plan years beginning in 2023, HDHPs must have an annual deductible of no less than $2,650, up $200 from 2022; but not more than $3,950, an increase of $250 from tax year 2022. For self-only coverage, the maximum out-of-pocket expense amount is $5,300, up $350 from 2022. For family coverage, the annual deductible cannot be less than $5,300, up from $4,950 for 2022; however, the deductible cannot be more than $7,900, up $500 from the 2022 limit. For family coverage, the out-of-pocket expense limit is $9,650 for tax year 2023, an increase of $600 from 2022.

For Health Savings Accounts (HSAs) and corresponding qualified high deductible health plan coverage, the previously announced limits for 2023 are as follows: 

HSA (previously announced): Single $3,850, Family $7,750 per year

Minimum deductible for qualifying HDHP: Single $1,500, Family $3,000 per year

Maximum out-of-pocket expenses for HDHP: Single $7,500, Family $15,000

Qualified transportation and parking – For 2023, the monthly limit for the qualified transportation fringe benefit and the monthly limitation for qualified parking increases to $300, up $20 from the limit for 2022.

QSEHRAs – For 2023, to qualify as a qualified small employer health reimbursement arrangement, the arrangement must cap the total amount of payments and reimbursements to $5,850 for self-only coverage and $11,800 for family coverage.

Adoption assistance programs – For 2023, the maximum amount from an employee’s gross income under an employer-provided adoption assistance program for the adoption of a child will be $15,950. This exclusion begins to phase out for individuals with modified adjusted gross income in excess of $239,230 and will be completely phased out at $279,230 modified adjusted gross income.

Small employer health insurance credits – Adjustments impact the small employer health insurance credit because the maximum credit is phased out based on the employer’s number of full-time equivalent employees in excess of 10. For 2023, the average annual wage level at which the credit phases out for small employers will be $30,700 (up from $28,700 in 2022).

Employers providing any of the applicable arrangements will need to ensure amounts are adjusted and communicated to employees, and plan documents are updated accordingly.

SBAM offers Premium Only Plan, Health Savings Account, Flexible Spending Account and Health Reimbursement Arrangement administration through our partner, Kushner & Company. Visit sbam.org/kushner for details.