The IRS and Social Security Administration released the health, retirement, and payroll contribution limits for 2023. Limits have increased from 2022 levels due to inflation.
- Social Security COLA. The Social Security cost of living adjustment (COLA) is set at 8.7% for 2023. This rate is calculated based on the Consumer Price Index from the Department of Labor’s Bureau of Labor Statistics. It is one of the highest adjustments ever released.
- Health FSA Limit. Contributions to a health flexible spending account plan are capped at $3,050 for 2023 which is a $200 increase from 2022. The maximum permissible carryover amount is increased $40 to $610.
- Dependent Day Care FSA Limit. The $5,000/$2,500 contribution limit for dependent day care flexible spending account plans remains unchanged for 2023.
- Qualified Transportation Limit. The monthly maximum amount that may be excluded from income for qualified parking benefits is $300 in 2023. The combined monthly limit for transit passes and vanpooling expenses is also $300.
- Adoption Expenses. The maximum amount that may be excluded from gross income under an employer-provided adoption assistance program for the adoption of a child will be $15,950 in 2023, an increase from $14,890 in 2022.
- Retirement Plans. The elective deferral limit for 401(k) plans will increase to $22,500 in 2023 and the catch-up limit will be $7,500.
Employers should administer their 2023 plans in compliance with new revised limits.
