The IRS recently released Revenue Procedure 2023-34 (https://www.irs.gov/pub/irs-drop/rp-23-34.pdf), which contains adjustments for various tax-related amounts that are indexed for inflation. As indicated in this guidance:
- The cap on health FSA salary reduction contributions for plan years beginning in 2024 has increased. The maximum amount participants may contribute to a health FSA through salary reduction during the 2024 plan year will be $3,200. If a cafeteria plan permits the carryover of unused health FSA amounts, the maximum carryover amount is $640.
- The monthly limits on transit/commuter highway vehicle benefits and parking benefits for 2024 have increased to $315 per month of each type of benefit.
In light of these increases, employers should review the plan documents governing their health FSAs and/or transportation plans to determine whether these increases are automatically incorporated into the plans. It may be necessary to amend the plans to adopt the increased limits (if the plans do not automatically incorporate them and the employer intends to implement the increases in 2024) or reject the increased limits (if the plans automatically incorporate them but the employer does not wish to implement the increases in 2024).
If you have any questions or need assistance amending your plan, please contact us.