The Internal Revenue Service (IRS) recently released 2022 cost-of-living adjustments applicable to dollar limitations for employer-sponsored health and welfare plans and retirement plans.
The changes in the 2022 cost-of-living adjustments for employer-sponsored health and welfare plans are summarized in the table below:
|Health and Welfare Plan Limits (Rev. Proc. 2021-45 and Rev. Proc. 2021-25)||2022||2021||Change|
|Health Flexible Spending Account (Health FSA) Maximum Salary Reduction Limit||$2,850||$2,750||+ $100|
|Health FSA Carryover Limit||$570||$550||+ $20|
|Qualified Transportation Fringe Benefit and Qualified Parking (Monthly Limit)||$280||$270||+ $10|
|Maximum Amount Excluded from Employee's Gross Income for the Adoption of a Child with Special Needs Through an Adoption Assistance Program (AAP)||$14,890||$14,440||+ $450|
|Maximum Amount Excluded from an Employee's Gross Income for Amounts Paid by an Employer for Qualified Adoption Expenses Through an AAP*||$14,890||$14,440||+ $450|
|High Deductible Health Plan (HDHP) Maximum Annual Out-of-pocket Limit (Excluding Premiums) for Self-only Coverage||$7,050||$7,000||+ $50|
|HDHP Maximum Annual Out-of-pocket Limit (Excluding Premiums) for Family Coverage||$14,100||$14,000||+ $100|
|HDHP Minimum Annual Deductible for Self-only Coverage||$1,400||$1,400||None|
|HDHP Minimum Annual Deductible for Family Coverage||$2,800||$2,800||None|
|Health Savings Account (HSA) Annual Contribution Limit for Self-only Coverage||$3,650||$3,600||+ $50|
|HSA Annual Contribution Limit for Family Coverage||$7,300||$7,200||+ $100|
|HSA Catch-up Contribution Limit||$1,000||$1,000||None|
|Dependent Care Flexible Spending Account (Dependent Care FSA)** Annual Contribution Limit for Employee's Who Are Married and Filing a Joint Return or if the Employee Is a Single Parent||$5,000||$10,500||– $5,500|
|Dependent Care FSA Annual Contribution Limit if Employee Is Married But Filing Separately||$2,500||$5,250||– $2,750|
|Maximum Amount Made Newly Available for the Plan Year for an Excepted Benefit Health Reimbursement Arrangement (EBHRA)||$1,800||$1,800||None|
* The amount excludable from an employee's gross income for amounts paid by an employer for qualified adoption expenses through an AAP begins to phase out in 2022 for taxpayers with modified adjusted gross income in excess of $223,410 and is completely phased out in 2022 for taxpayers with modified adjusted gross income of $263,410 or more.
**Dependent FSA limits are set by statute and do not adjust for inflation, but the Dependent FSA limits were temporarily increased for 2021 only by the American Rescue Plan Act of 2021 due to the COVID-19 pandemic.
The changes in the 2022 cost-of-living adjustments for employer-sponsored retirement plans are summarized in our previous article, Looking to Save More? You're in Luck!
Employers who sponsor health and welfare plans and retirement plans should take advantage of the new increased limits by making adjustments to plan administrative/operational procedures.
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.