IRS Announces Pension and Benefit Plan Limits for 2023, SSA Announces COLA Adjustment

On October 18, 2022, the Internal Revenue Service (IRS) cost of living adjustments announced dollar caps for pension benefits and contributions for 2023. These adjustments are in addition to previously announced increases to other employee benefit plan caps. In addition, the Social Security Administration recently announced the 2023 Social Security Salary Base Cost of Living Adjustment.

Updated limits for 2023, compared to last year’s limits, are presented in the tables below.

The Social Security Administration announced the cost-of-living adjustment to the Social Security contribution and benefit base (also known as the “taxable earnings base”) for 2023.

To note: Federal Insurance Contribution Act (FICA) tax rates remain unchanged. The Old Age, Survivors and Disability Insurance (OASDI) tax of 6.20% for employers and employees (12.4% for the self-employed) applies to wages up to the annual security tax base social. The 1.45% Medicare tax for employers and employees is not limited to the taxable salary base and applies to all salaries. An additional 0.9% Medicare tax for employees only applies to all wages above specified income thresholds based on filing status ($250,000 for a jointly married filing, $125,000 for a filing married separately and $200,000 for all other taxpayers).

The Health Savings Account (HSA) and HDHP limits are as follows:

The Flexible Spending Account limits are as follows:

** Married and filing a joint statement or single parent statement

Expected benefits health reimbursement

Actions for employers

  • Update all plan documents that identify annual limits.
  • Update member communications as limits may impact important benefit choices for 2023.
  • Update human resources information systems (HRIS) and/or payroll systems with new limitations for administration, record keeping and tax reporting.
  • Ensure that all vendor data feeds are updated to comply with the new limits.
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