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Benefits & Compliance
Dec 29, 2022

IRS Releases FSA Contribution Limits for 2023

Lauren Hoover

The Internal Revenue Service (IRS) released the annual cost-of-living adjustments affecting the maximum contribution limits for several pre-tax benefits, including health flexible spending accounts (health FSAs) and transit/parking accounts. 

In Revenue Procedure 2022-38, the IRS confirmed that for plan years beginning on or after Jan. 1, 2023, the contribution limit for health FSAs will increase to $3,050. For those plans that allow a rollover of unused funds, the maximum rollover amount will increase by $40 to $610 for 2023.

Additionally, the monthly contribution and reimbursement limit for transit and parking FSAs will increase by $20 to $300 per account in 2023.

The 2023 limit for health savings accounts (HSAs) was previously announced in Revenue Procedure 2022-38. Please see the chart below for a summary of these changes for the new year.

 

2022 Limits

2023 Limits

Health FSA

$2,850

Rollover – Up to $570

$3,050

Rollover – Up to $610

Transit/Parking FSA

$280/month

$300/month

HSA

$3,650 Single Only

$3,850 Single Only

$7,300 Family

$7,750 Family

Remember, FSA funds are meant to be used within a plan year. Generally, the plan year must be a fixed 12-month period. Keep in mind that health FSAs have a “use-or-lose” rule, “meaning that any funds left unused at the end of the year are forfeited to the employer.” 

There are two exceptions to this rule permitted by the IRS: rollover and grace period. If funds are not used by the end of the year, up to $610 can be rolled over from the 2023 plan year into the next plan year. Alternatively, an employer can adopt a grace period for their health FSA. As explained by the IRS, “a grace period is a period of up to two months and 15 days immediately following the end of a plan year during which a participant may use amounts remaining from the previous plan year (including amounts remaining in a health FSA) to pay expenses incurred for certain qualified benefits during that two-month and 15-day period.” A health FSA may incorporate either of these features, however, a plan may not have both a rollover and grace period. 

Additionally, plans may also include run-out periods that provide participants additional time to submit claims incurred during the plan year (typically 90 days). This can be in addition to either a rollover or grace period. 

Here’s another read if you’re asking yourself, “is an FSA worth it?” 

How can PrimePay help?

PrimePay provides pre-tax benefits administration of, including HRAs, HSAs, and FSAs. When you choose PrimePay’s pre-tax benefit plan administration, you receive a dedicated service team, access to our support portal, automated claims processing, and a PrimePay debit card and mobile app.

Schedule a call today

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