The Internal Revenue Service recently issued its annual cost-of-living adjustments (COLAs) for the 2023 tax year for retirement plans as well as health and welfare benefit plans. These COLAs reflect significant increases in the consumer price index (CPI). Plan sponsors should both alert their employees and prepare to allow such changes for the 2023 tax year.
In Notice 2022-55, the IRS set forth COLAs for many retirement plan limits, including significantly increased contribution limits. Please see the table below for retirement plan cost of living adjustments:
| Retirement Plan Limits | 2023 | 2022 |
|
Deferral Limit |
$22,500 | $20,500 |
|
Catch-up Contribution Limit |
$7,500 | $6,500 |
|
DC Annual Addition Limit |
$66,000 | $61,000 |
|
Annual Compensation Cap |
$330,000 | $305,000 |
|
Taxable Wage Base |
$160,200 |
$147,000 |
|
DB Annual Benefit Limit |
$265,000 |
$245,000 |
|
457(b) Contribution Limit |
$22,500 |
$20,500 |
|
HCE Threshold |
$150,000 |
$135,000 |
|
SIMPLE 401(k) Limit |
$15,500 |
$14,000 |
|
SIMPLE 401(k) Catch-up |
$3,500 |
$3,000 |
|
Maximum ESOP Account Balance |
$1,330,000 |
$1,230,000 |
|
ESOP 5-year Distribution Period Limit |
$265,000 |
$245,000 |
|
Key Employee Threshold |
$215,000 |
$200,000 |
|
QLAC |
$155,000 |
$145,000 |
Previously, in Revenue Procedures 2022-24 and 2022-38, the IRS increased various limits applicable to health and welfare arrangements. Notably, the IRS increased Health Savings Account annual contribution limit to $3,850 for single individuals and $7,750 for families.
Please see the chart below for other health and welfare plan COLAs:
| Welfare Plan Limits | 2023 | 2022 |
|
Health FSA Max |
$3,050 |
$2,850 |
|
Dependent Care FSA Max |
$5,000 |
$5,000 |
|
Adoption Credit Limit |
$15,950 |
$14,890 |
|
HDHP Min Annual Deductible (Single) |
$1,500 |
$1,400 |
|
HDHP Min Annual Deductible (Family) |
$3,000 |
$2,800 |
|
HDHP Out of Pocket Max (Single) |
$7,500 |
$7,050 |
|
HDHP Out of Pocket Max (Family) |
$15,000 |
$14,100 |
|
HSA Max Contribution Limit (Single) |
$3,850 |
$3,650 |
|
HSA Max Contribution Limit (Family) |
$7,750 |
$7,300 |
|
HSA Catch-Up Contribution Limit (Not Indexed) |
$1,000 |
$1,000 |
|
TSA Parking and Mass Transit Monthly Limit |
$300 |
$280 |
|
QSEHRA Reimbursement Limit (Single) |
$5,850 |
$5,450 |
|
QSEHRA Reimbursement Limit (Family) |
$11,800 |
$11,050 |
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
