Last updated on December 27th, 2022
At various times of the year, the IRS announces benefit plan limits for the following year. It’s important to understand these limits – and make sure your benefit-eligible employees do, too – in order to maximize what your company and employees get out of the benefit plans you invest in and offer.
Benefit plans are a great way to enhance your company’s employee value proposition and support your attraction, recruitment, and retention efforts. To maximize the investment you and your employees make in benefit plans, it’s important to provide clear and frequent communication explaining how benefits work and what employees can do to get the most from them. This is especially true when a communication can help an employee gain tax advantages and avoid losing money – this is where plan limits come in.
For example, earlier this year the IRS announced 2023 health care flexible spending account (FSA) limits are increasing to $3,050 (from $2,850 this year). That’s good news, as it helps employees put aside more tax-free money to pay for eligible out-of-pocket health care expenses, while reducing their taxable income – both of which will no doubt be welcomed given inflation and the current economic environment.
There are three caveats:
- Employees need to know about changes to limits and what it could mean to them.
- Employees need to know how to change their benefit elections to take advantage of new limits.
- Employees need to know what happens if they don’t use health care FSA funds and file claims by IRS deadlines (they lose the money). Extended grace periods for using the money in 2020 and 2021 due to federal stimulus packages are not available in 2023.
The important phrase here is “employees need to know.” If you also offer a high deductible health plan with a health savings account (HSA), things get even more complicated. Employees need to know whether an FSA or HSA is best for their situation.
See how complicated it can get? That doesn’t even get into defined benefit, defined contribution, compensation, and other IRS limits that will apply in 2023.
Since you have a business to run and may or may not have the resources who can spend the time educating your employees about all of the ins and outs of benefits, you may want to reach out to your benefits administrator for help.
RBT CPA’s affiliate — Spectrum Pension and Compensation – offers third party administration and related services (including communication) for clients in the Hudson Valley and beyond. While you won’t be competing with Fortune 100 companies for attention, you will get customized, personalized services to ensure compliance while promoting the value your plans deliver to your company and team.
Interested in learning more? Click here to see the summary of 2023 limits Spectrum shared with its clients and prospects just a few weeks ago and here to learn what Spectrum can do for your business and employees in 2023 and beyond.