[co-author: Mary Kennedy]
The Internal Revenue Service (IRS) recently released 2022 cost of living adjustments applicable to dollar limits for health and welfare plans and employer-sponsored retirement plans.
The evolution of the 2022 cost-of-living adjustments for employer-sponsored health insurance and provident schemes is summarized in the table below:
|Health and Wellness Plan Limits (Rev. proc. 2021-45 and Rev. proc. 2021-25)||2022||2021||Change|
|Maximum Health Flexible Spending Account (FSA Health) Salary Reduction Limit||$2,850||$2,750||+ $100|
|FSA Health Deferral Limit||$570||$550||+$20|
|Eligible transportation benefits and eligible parking (monthly limit)||$280||$270||+$10|
|Maximum amount excluded from the employee’s gross income for the adoption of a child with special needs under 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 eligible adoption expenses through an AIP*||$14,890||$14,440||+ $450|
|High Deductible Health Plan (HDHP) Maximum annual out-of-pocket limit (excluding premiums) for personal coverage||$7,050||$7,000||+$50|
|Maximum annual limit of HDHP disbursements (excluding premiums) for family coverage||$14,100||$14,000||+ $100|
|HDHP Minimum Annual Deductible for Personal Coverage||$1,400||$1,400||Nothing|
|HDHP Minimum annual deductible for family coverage||$2,800||$2,800||Nothing|
|Health Savings Account (HSA) annual contribution limit for personal coverage||$3,650||$3,600||+$50|
|Annual HSA contribution limit for family coverage||$7,300||$7,200||+ $100|
|HSA catch-up contribution limit||$1,000||$1,000||Nothing|
|Dependent Care Flexible Spending Account (Per Dependent Care FSA) ** Annual contribution limit for employees who are married and filing jointly or if employee is a single parent||$5,000||$10,500||– $5,500|
|Annual FSA contribution limit for dependent care if employee is married but files separately||$2,500||$5,250||– $2,750|
|Maximum amount made newly available for the plan year for an Excepted Health Benefits Reimbursement Arrangement (EBHRA)||$1,800||$1,800||Nothing|
* The amount that can be excluded from an employee’s gross income for amounts paid by an employer for eligible adoption expenses through an AIP begins to phase out in 2022 for taxpayers whose modified adjusted gross income exceeds $223,410 and is completely eliminated in 2022 for taxpayers with modified income. adjusted gross income of $263,410 or more.
** Dependent FSA limits are set by law and do not adjust for inflation, but dependent FSA limits were temporarily increased for 2021 only by the American Rescue Plan Act of 2021 due to the COVID-19 pandemic.
Changes to the 2022 cost of living adjustments for employer-sponsored pension plans are summarized in our previous article, Looking to save more? You’re lucky!
Employers sponsoring health and welfare plans and pension plans should take advantage of the new increased limits by making adjustments to plan administrative/operational procedures.