In response to inflation felt across the country, the Internal Revenue Service is making changes to the Flexible Spending Accounts and Health Savings Accounts. The new measures make for some of the most impactful changes regarding employees. Employees can save money by putting away pre-tax money to pay for their medical expenses. For example, people can now put up to $3,050 in an FSA. That’s up $200 from the current cap of $2,850. The maximum carryover amount also increased from $570 in 2022 to $610 in 2023.
Other new 2023 limits include:
$300 per month
$15,950 per year
Single – $5,850 per year
Family – $11,800 per year
Single – $3,850 per year
Family – $7,750 per year
Maximum deductible for qualifying HDHP
Single – $1,500 per year
Family – $3,000 per year
Maximum out-of-pocket expenses for HDHP
Single – $7,500
Family – $15,000
Spend It, or Lose It
Employees have to be careful to remember that if they don’t use the money set aside for these programs, they will forfeit it. This means that your employer will keep any money that you didn’t use. One report found that workers in the United States end up losing about $3 billion a year because they didn’t use the money they set aside.
Employers can give their workers a grace period of up to two and a half months after the end of the year to claim the money. During the beginning of the COVID-19 pandemic, some of these rules were relaxed to give people more time to claim their money. However, that was considered a temporary aid due to the circumstances surrounding the pandemic.
Key Differences Between FSAs and HSAs
- An FSA is managed by your job. Meanwhile, an HSA is something you own as an employee.
- If you leave your company, an FSA does not follow you to your next place of employment.
- HSAs are meant for people who have high-deductible healthcare plans
- Money in HSAs will roll over each year. Money in an FSA will not roll over each year.
FSA Employer Contribution Limits for 2023
Employers are allowed to give FSA contributions on top of the amount that their employees select. Generally, employer contributions don’t exceed $500 per year for FSAs to remain in good standing. However, there are some things to note:
- Employers can match up to $500. This isn’t dependent on whether an employee contributes to an FSA themselves.
- If more than $500, employers can make a “dollar-for-dollar” match to their worker’s contribution (up to $6,100 combined yearly contribution).
Alltrust: Employee Wellness is Our Priority
Employee benefits are one of the largest expenses for companies. That’s why Alltrust Insurance wants to make sure all of our clients are covered and knowledgeable about changes that may impact their business or their employees. We’ll help your company with managing costs, so your business can become more efficient. We’re dedicated to coming up with solutions that work for the company and its employees. We also have services meant to improve the wellness of your employees. Alltrust can help you come up with a workplace wellness program that will give your employees resources and guides to improve their overall health. To learn more about how we can help your business stay on top of future IRS updates and more, please contact us today.