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Sizeable Increases to 2023 Plan Limits Due to Inflation

The Internal Revenue Service recently issued its annual cost-of-living adjustments (COLAs) for the 2023 tax year for retirement plans as well as health and welfare benefit plans. These COLAs reflect significant increases in the consumer price index (CPI). Plan sponsors should both alert their employees and prepare to allow such changes for the 2023 tax year.  

In Notice 2022-55, the IRS set forth COLAs for many retirement plan limits, including significantly increased contribution limits. Please see the table below for retirement plan cost of living adjustments:

Retirement Plan Limits

2023

2022

Deferral Limit

$22,500

$20,500

Catch-up Contribution Limit

$7,500 

$6,500 

DC Annual Addition Limit

$66,000 

$61,000 

Annual Compensation Cap

$330,000 

$305,000 

Taxable Wage Base 

$160,200 

$147,000 

DB Annual Benefit Limit

$265,000 

$245,000 

457(b) Contribution Limit

$22,500 

$20,500 

HCE Threshold

$150,000 

$135,000 

SIMPLE 401(k) Limit

$15,500 

$14,000 

SIMPLE 401(k) Catch-up

$3,500 

$3,000 

Maximum ESOP Account Balance

$1,330,000 

$1,230,000 

ESOP 5-year Distribution Period Limit 

$265,000 

$245,000 

Key Employee Threshold

$215,000 

$200,000 

QLAC

$155,000 

$145,000 

Previously, in Revenue Procedures 2022-24 and 2022-38, the IRS increased various limits applicable to health and welfare arrangements. Notably, the IRS increased Health Savings Account annual contribution limit to $3,850 for single individuals and $7,750 for families. 

Please see the chart below for other health and welfare plan COLAs:

Welfare Plan Limits 

2023 

2022

Health FSA Max

$3,050

$2,850

Dependent Care FSA Max

$5,000

$5,000

Adoption Credit Limit

$15,950

$14,890

HDHP Min Annual Deductible (Single)

$1,500

$1,400

HDHP Min Annual Deductible (Family)

$3,000

$2,800

HDHP Out of Pocket Max (Single)

$7,500

$7,050

HDHP Out of Pocket Max (Family)

$15,000

$14,100

HSA Max Contribution Limit (Single)

$3,850

$3,650

HSA Max Contribution Limit (Family) 

$7,750

$7,300

HSA Catch-Up Contribution Limit (Not Indexed)

$1,000

$1,000

TSA Parking and Mass Transit Monthly Limit

$300

$280

QSEHRA Reimbursement Limit (Single)

$5,850

$5,450

QSEHRA Reimbursement Limit (Family)

$11,800

$11,050

© 2023 Miller, Canfield, Paddock and Stone PLC National Law Review, Volume XII, Number 305
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About this Author

Brian Gallagher Labor & Employment Attorney Miller Canfield Law Firm lansing Michigan
Senior Counsel

As an experienced benefits and executive compensation attorney, Brian Gallagher helps employers navigate the complicated and ever-changing legal landscape of ERISA and the Tax Code. Brian works closely with employers of all sizes in many different industries to design and maintain their benefit plans, ensure compliance and develop practical solutions when mistakes inevitably do occur.

Brian is currently serving as the Treasurer of the Taxation Section of the State Bar of Michigan and previously chaired its Employee Benefits Committee. Named a '...

517.483.4914
Samantha A. Kopacz Labor & Employment Attorney Miller, Canfield, Paddock and Stone Troy, MI
Principal

Samantha Kopacz's practice centers around the design, implementation and administration of employee benefit plans and executive compensation arrangements. Sam has more than a decade of experience representing employers, trustee boards, group health plans, insurance companies, and third-party administrators in regulatory and compliance issues related to qualified and non-qualified retirement plans, health and welfare plans, fringe benefit plans, and executive compensation and incentive programs.

Sam has extensive experience structuring and advising on defined contribution plans (such...

248-267-3223
Samuel L. Parks  Tax Lawyer Employment and Labor Troy, Michigan, Miller Canfield
Associate

Samuel Parks is an associate in Miller Canfield's Corporate Group, with a focus on transactional and particularly tax work. He also has experience advising both public and private sector clients on employee benefit issues, including facilitating corrections of plan documentation and operational compliance failures, as well as drafting plan documentation and participant communications. A graduate of the University of Michigan Law School, he has previously worked at the Michigan Supreme Court and the Washtenaw Public Defender's Office. 

248-267-3361
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