IRS Increases 2023 Health FSA Contribution Limit

The IRS announced the cost-of-living adjusted maximum health FSA contribution for 2023.

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November 08, 2022

On October 18, 2022, the Internal Revenue Service (IRS) released Revenue Procedure 2022-38 that outlines the 2023 cost-of-living adjustments for health flexible spending accounts (FSAs) and a wide array of other tax-related limits. The voluntary employee health FSA contribution limit for 2023 will be $3,050 – a $200 increase over the 2022 limit. This limit applies only to employees’ (rather than employers’ contributions). If a cafeteria plan permits health FSA carryovers, the maximum amount that a participant can carry over from the 2023 to the 2024 plan year is $610 – a $40 increase.

Health Flexible Spending Account (FSA)
  2022 2023
Maximum Contribution $2,850 $3,050
(+$200)
Carryover Maximum
$570 $610
(+$40)

The maximum pre-tax voluntary contribution for dependent care assistance plan (DCAP) is not adjusted the cost-of-living adjustments outlined by Revenue Procedure 2022-38 since the DCAP limit is not inflation-adjusted. For 2023, the maximum DCAP contribution amount will remain at $5,000 (or $2,500 per parent if married and filing separately) and future years, unless changed by Congress.

Next Steps

Employer plan sponsors wishing to increase health FSA contribution limits for 2023 will need to coordinate with third-party administrators, amend applicable plan documents, and notify plan participants of the change.

Resources

If you have questions, comments, or concerns about these or other regulatory and compliance issues, please contact us.

We provide this material for informational purposes only; it is not a substitute for legal advice.

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