December 07, 2023
On November 9, 2023, the Internal Revenue Service (IRS) published Revenue Procedure 2023-34 that outlines the 2024 cost-of-living adjustments for health flexible spending accounts (FSAs) and a wide array of other tax-related limits. The voluntary employee health FSA contribution limit for 2024 will be $3,200 – a $150 increase over the 2023 limit. If a cafeteria plan permits health FSA carryovers, the maximum amount that a participant can carry over from the 2024 to the 2025 plan year is $640 – a $30 increase.
Key Action
If electing to increase health FSA contribution limits: coordinate with third-party administrators, amend applicable plan documents and notify plan participants of the change.
| Health Flexible Spending Account (FSA) | ||
|---|---|---|
| 2023 | 2024 | |
| Maximum Contribution | $3,050 | $3,200 (+$150) |
| Carryover Maximum | $610 |
$640 (+$30) |
The maximum pre-tax voluntary contribution for dependent care assistance plan (DCAP) is not impacted by the cost-of-living adjustments outlined by Revenue Procedure 2023-34 since the DCAP limit is not inflation-adjusted. For 2024, the maximum DCAP contribution amount will remain at $5,000 (or $2,500 per parent if married and filing separately) and future years, unless changed by Congress.
Next Steps
Employer plan sponsors wishing to increase health FSA contribution limits for 2023 will need to coordinate with third party administrators, amend applicable plan documents and notify participants of the change.
The IRS and the Department of Health and Human Services/Centers for Medicare and Medicaid Services (HHS/CMS) previously announced the other 2024 inflation-adjusted limits in May 2023, which the Business Group summarized in an article available here.
Resources
- IRS Revenue Procedure 2023-34
- IRS Press Release: IRS Provides Tax Inflation Adjustments for Tax Year 2024
If you have questions, comments, or concerns about these or other regulatory and compliance issues, please contact us.
We provide this material for informational purposes only; it is not a substitute for legal advice.
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