Changes include:
Flexible Savings Accounts (FSAs)/Health Savings Accounts (HSAs)
Next year, employees can put an extra $200 into their FSAs/HSAs, with the annual contribution limit rising to $3,050 (up from $2,850 in 2022). Employers should make sure that their plan documents, summary plan descriptions and election forms disclose this change to employees.
QSEHRAs
Allowances for qualified small employer health reimbursement arrangements (QSEHRAs) increased to $5,850 for individual coverage (an increase of $400) and $11,800 for family coverage (an increase of $750) for 2023. QSEHRAs allow small employers to give their employees money tax-free to purchase individual health policies on an Affordable Care Act marketplace exchange or through an insurance broker.
Adoption assistance programs
For 2023, an employer can subsidize up to $15,950 for qualified child-adoption expenses, up from $14,890 in 2022.
Employer-sponsored commuting benefits
Employees participating in employer-subsidized commuting benefits will receive more money toward their expenses next year. The IRS increased its monthly exclusions for both qualified parking expenses and commuter transit passes to $300 for each benefit (up from $280 in 2022).
At the same time, the Social Security Administration has announced that it will increase its contribution and benefit base (also known as the taxable wage base) for 2023 to $160,200 from $147,000 in 2022. Any increase in the wage base means that more of employees’ income is subject to Social Security taxes.
Employees whose compensation exceeds the current 2022 taxable earnings cap of $147,000 may notice a slight decrease in net take-home pay beginning next January due to the payroll tax adjustment. By the start of the new year, employers are advised to adjust their payroll systems to account for the higher taxable wage base and notify affected employees that more of their pay will be subject to payroll withholding.
If you have questions about your payroll systems and making sure that they’re up to date, please give us a call.