IRS Releases 2022 Inflation-Adjusted Amounts for Healthcare FSAs, Commuter Benefits, and More

Health FSAs

On November 10, 2021, the IRS announced in Rev. Proc. 2021-45 the annual inflation adjustments for the 2022 tax year. Included in this announcement, and of consequence to the employee benefits world, the IRS noted that the dollar limit maximum for employee contributions made on a pre-tax basis via salary reductions to health flexible spending accounts (FSAs) under a cafeteria plan will be modified for 2022, after remaining the same from the 2020 to 2021 calendar years. For 2022, the dollar limit cap is permitted to increase (by $100) from $2,750 to $2,850. For cafeteria plans that allow for the carryover of unused amounts, the maximum carryover amount is now permitted to increase by $20, now capped at $570 (for 2022 rollovers into 2023 plans).

As a result of this news, employers should ensure that their health FSAs are administered in such a way as to prohibit employees from exceeding $2,850 in pre-tax contributions and, if applicable, no more than $570 in carryovers (from 2022 into 2023). Although, it should of course be noted that employers have the right to impose a maximum limit on employee contributions to health FSAs that is lower than what the ACA permits. For example, an employer could opt to cap employee contributions for 2022 at $2,500 instead but cannot set the limit at $2,900 in defiance of the ACA’s provisions. Whatever amount the employer decides on should be communicated to employees during open enrollment and strictly adhered to. For employers that provide health FSA contributions, employees are permitted to elect up to the IRS limit and still receive the employer contribution in addition.

It should also be mentioned that the health FSA limit applies on an individual employee basis only. Therefore, even employees with spouses and dependents are still capped at $2,850 in maximum salary reductions for the year. Family members are eligible to enroll in their own separate health FSAs if they so choose, however.

Health Plan Limits	2021	2022
Health FSA Contribution Limit	$2,750	$2,850
Health FSA Carryover Limit	$550	$570

 

Please note that while the COVID-19-related FSA relief guidance illustrated in the Consolidated Appropriations Act, 2021 and IRS Notice 2021-15 (from February 2021) permitted employers the opportunity to offer carryovers of any and all unused FSA balances from Plan Years ending in 2020 and 2021 into later Plan Years ending in 2021 and 2022, respectively, that guidance has not been extended for subsequent years. We will of course continue to monitor for any updates in this regard.

Dependent Care FSAs

Please be aware that while the American Rescue Plan Act of 2021 (ARPA) briefly increased the DCFSA annual limits to $10,500 (up from what was previously $5,000) for single taxpayers and married couples filing jointly and to $5,250 (up from $2,500) for married individuals filing separately, these increased limits applied only to plan years beginning after Dec. 31, 2020 and prior to Jan. 1, 2022.

For 2022, the DCFSA maximum contribution amount will return to their pre-pandemic levels of $5000 per year if single or $2,500 for married people filing separately. Reverting to a time before ARPA, married couples will continue to have a combined $5,000 limit in total, regardless of whether both parties have access to separate DCFSAs through their own employer.

DCFSA Limits	2021	2022
	$5,000	$5,000

 

Commuter Benefits

Further noted in Rev. Proc. 2021-45, for taxable plan years beginning in 2022, the monthly limitation for commuter benefits will increase by $10 from $270 to $280. This applies to qualified parking and transit benefits alike.

Parking and Transit Limits (Per Month)	2021	2022
Parking	$270	$280
Transit	$270	$280

 

Health Savings Accounts and High Deductible Health Plans

Please see our previous guidance on the 2022 adjusted limits for HSAs and HDHPs, as addressed in Rev. Proc. 2021-25.