IRS Announces 2023 Employee Benefit Plan Limits – Employee Benefits and Compensation

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The Internal Revenue Service (IRS) and Social Security Administration announced cost-of-living adjustments to dollar limits for various employer-sponsored retirement and welfare plans and the salary base of Social Security for 2023. The table below compares the applicable dollar caps for certain benefit programs and the Social Security salary base for 2022 and 2023.*

PENSION PLAN LIMITS (guide link) 2022 Δ 2023
Annual compensation limit $305,000 $330,000
401(k), 403(b) and 457(b) contributions before tax $20,500 $22,500
Catch-up contributions (if age 50 or over) $6,500 $7,500
Highly paid employee threshold $135,000 $150,000
Compensation threshold for key salaried executives $200,000 $215,000
Annual defined benefit plan benefits and accrual limit $245,000 $265,000
Defined contribution plan annual contribution limit $61,000 $66,000
Employee stock ownership plan (ESOP) ceiling to determine the extension of the five-year general distribution period $245,000 $265,000
ESOP limit for determining the maximum account balance subject to the five-year general distribution period $1,230,000 $1,330,000
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2022 Δ 2023
Flexible Health Spending Accounts
Maximum salary reduction limit $2,850 $3,050
FSA Health Deferral Limit $570 $610
Flexible Spending Accounts for Dependent Care±
If the employee is married and filing a joint return or if the employee is a single parent $5,000 = $5,000
In employee is married but files separately $2,500 = $2,500
Excepted Health Benefits Reimbursement Schemes (EBHRA) $1,800 $1,950±
Eligible transportation benefits and eligible parking (monthly limit) $280 $300
High Deductible Health Plans (HDHP) and Health Savings Accounts (HSA)
HDHP – Maximum annual disbursement limit (excluding bonuses):
Coverage for self only $7,050 $7,500
Family coverage $14,100 $15,000
HDHP – Minimum annual deductible:
Coverage for self only $1,400 $1,500
Family coverage $2,800 $3,000
HSA – Annual contribution limit:
Coverage for self only $3,650 $3,850
Family coverage $7,300 $7,750
Catch-up contributions (55 years or older)± $1,000 ? $1,000
SOCIAL SECURITY SALARY BASE (guide link) 2022 Δ 2023
Social Security Maximum Taxable Earnings $147,000 $160,200

Plan sponsors should update payroll and plan administration systems for the 2023 cost-of-living adjustments and should incorporate the new limits into relevant member communications, such as open enrollment materials and summary descriptions of the schemes.

* Dollar limits are generally applied on a calendar year basis; however, some dollar limits are applied on a plan year, tax year, or statute-barred basis.

± Not indexed for cost of living adjustments, except for limited guidance issued for some years.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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