Internal Revenue Service (IRS) Releases 2023 Index Figures

Some good information from HealthEquity….

We have some updates to share around recent legislative changes that may impact your consumer-directed benefits.

Internal Revenue Service (IRS) Releases 2023 Index Figures
On October 18, 2022, the Internal Revenue Service (IRS) announced the official 2023 Healthcare Flexible Spending Account (HCFSA), Limited Purpose FSA (LPFSA), commuter, and adoption contribution limits, and it’s good news for clients wanting to add value to their benefits programs and allow their members additional tax savings.

2023 employee salary reduction contribution limits:

• 2023 Healthcare FSA/Limited Purpose FSA – $3,050 (Increase of $200 from 2022)
  • If the cafeteria plan permits, the maximum FSA carryover from 2023 to 2024 = $610 (Increase of $40 from 2022)
• 2023 Dependent Care FSA (No Change for 2023)
  • $5,000 (Family)
  • $2,500 (Married filing separately)
• 2023 Commuter (Parking and Transit) – $300/month (Increase of $20 from 2022)
• 2023 Adoption limit – $15,950 (Increase of $1,060 from 2022)

Please note: If you are currently at the 2022 IRS maximum, your HCFSA and Commuter limits will be automatically updated to the new 2023 maximums for your new plan year. Please communicate with your HealthEquity contact if you do not wish to be updated to the new 2023 maximum as soon as possible. If you are not currently at the 2022 IRS maximum, your 2023 HCFSA and Commuter limits will not be automatically updated for your new plan year.

You can review our full compliance alert here for a complete listing of the 2023 Index Figures.

New Cafeteria Plan Election Change Allowed Fix to “Family Glitch”
On October 11, 2022, the Department of the Treasury and the Internal Revenue Service (IRS) released finalized regulation that revise a previous interpretation of an affordability test for employer-sponsored minimum essential coverage for purposes of premium tax credit eligibility under the Affordable Care Act (ACA).

The final regulations clarify that, for taxable years beginning in 2023, the affordability test for family members is to be based on the cost of family (rather than employee-only) coverage. Based on this revision, employer-sponsored minimum essential coverage is considered affordable for family members if the required employee contribution for family coverage is less than 9.5% of household income.

You can review our full compliance alert here for more details on the “Family Glitch” fix.

The COVID-19 Public Health Emergency Extended

On October 13, 2022, the Department of Health and Human Services (HHS) announced, as was expected, that the Public Health Emergency (PHE) has again been extended for another 90 days.

Originally scheduled to expire on April 26, 2020, HHS has renewed these periods at around the end of each 90-day period. This latest 90-day period is currently scheduled to expire on January 11, 2023.

You can review our full compliance alert here for more details on the extension of the PHE (and “Family Glitch” fix).

Compliance Reminders for Cafeteria Plans and Health Reimbursement Arrangements
In the compliance world of never-ending change, we are providing a refresher course for employers on two of the compliance requirements of Internal Revenue Code (IRC) §125 cafeteria plans and IRC §105 that haven’t changed: nondiscrimination testing and Form 5500 filing obligations.

You can review our full compliance alert here for more details on this compliance refresher around nondiscrimination testing and Form 5500 filing obligations.

These summaries are intended to educate employers and plan sponsors on the potential effects of recent government guidance on employee benefit plans. These summaries are not and should not be construed as legal or tax advice. The government’s guidance is complex and very fact specific. As always, we strongly encourage employers and plan sponsors to consult competent legal or benefits counsel for all guidance on how the actions apply in their circumstances. We will follow up as more information is available.

Sincerely,

Shayne