On Oct. 18, 2022, the IRS announced that the limit on employees’ salary reduction contributions to a health FSA will increase to $3,050 for plan years that begin in 2023. For health FSAs that allow carryovers of unused amounts, the carryover limit for 2023 increases to $610.
Employers should ensure that their health FSAs will not allow employees to make pre-tax contributions in excess of $3,050 for the 2023 plan year and communicate the 2023 limit to their employees as part of the open enrollment process.
An employer may continue to impose its own dollar limit on employees’ salary reduction contributions to health FSAs, as long as the employer’s limit does not exceed the maximum limit in effect for the plan year. For example, an employer may decide to limit employee health FSA contributions for the 2023 plan year to $2,500.
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