The below presents the Internal Revenue Service (IRS) recently announced 2023 cost-of-living adjustments for retirement, health and welfare plans, and transportation programs. Retirement plan limitations increased significantly for 2023 due to inflation. Percentage-wise, retirement plan increases ranged from 7.5% to 16.7%. Most limitations increased by about 8.2%. Other percentages varied due to rounding. Health and welfare limitation increases were not as high because they were determined earlier in 2023 before inflation peaked, with an average increase of roughly 6.5%.
RETIREMENT PLAN LIMITS
The 2023 annual retirement plan limitations as compared to 2022 are as follows:
| 2023 | 2022 | |
|---|---|---|
| 401(k), 403(b) and 457(b) Plan Elective Deferrals | $22,500 | $20,500 |
| Age 50 Catch-Up Contribution (For Above Plans) | $7,500 | $6,500 |
| SIMPLE Plan Elective Deferrals | $15,500 | $14,000 |
| SIMPLE Plan Age 50 Catch-Up Contribution | $3,500 | $3,000 |
| IRA Contribution Limit (Traditional and Roth) | $6,500 | $6,000 |
| IRA Age 50 Catch-Up Contribution (Not Indexed) | $1,000 | $1,000 |
| Defined Contribution Plan Limit | $66,000 | $61,000 |
| Defined Benefit Plan Limit | $265,000 | $245,000 |
| Annual Compensation Limit | $330,000 | $305,000 |
| Highly Compensated Employee | $150,000 | $135,000 |
| Key Employee | $215,000 | $200,000 |
| FICA Taxable Wage Base | $160,200 | $147,000 |
HEALTH AND WELFARE PLAN LIMITS
The 2023 annual limitations as compared to 2022 are as follows:
| 2023 | 2022 | |
|---|---|---|
| Flexible Spending Accounts (FSA) | $3,050 | $2,850 |
| Dependent Care FSA (Not Indexed) | $5,000 | $5,000 |
| Health Savings Account (HSA) Age 55 Catch-Up Contribution (Not Indexed) | $1,000 | $1,000 |
| Self-Only Coverage: | ||
| HSA Contribution | $3,850 | $3,650 |
| Minimum Deductible for High Deductible Health Plan (HDHP) | $1,500 | $1,400 |
| Maximum Out-Of-Pocket (OOP) Expense Limit for HDHP | $7,500 | $7,050 |
| Family Coverage: | ||
| HSA Contribution | $7,750 | $7,300 |
| Minimum Deductible for HDHP | $3,000 | $2,800 |
| Maximum OOP Expense Limit for HDHP | $15,000 | $14,100 |
QUALIFIED TRANSPORTATION FRINGE BENEFIT LIMITS
The 2023 monthly qualified transportation fringe benefit limitations as compared to 2022 are as follows:
| 2023 | 2022 | |
|---|---|---|
| Parking and Transit | $300 | $280 |
| Bicycle | $20 | $20 |
Plan sponsors should update payroll and plan administration systems
for the 2023 cost-of-living adjustments and incorporate the new
limits in relevant employee and participant communications.
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.