Skip to main content
Article | Insider

2022 inflation-adjusted limits affect range of employee benefit plans

Health and Benefits|Retirement
N/A

By Cindy Brockhausen , Stephen Douglas and Kathleen Rosenow | November 22, 2021

The 2022 tax year inflation adjustments could affect the design, administration and tax reporting for retirement and benefit-related plans.

On November 10, the IRS released Revenue Procedure 2021-45, which contains the 2022 tax year inflation adjustments for a number of income tax provisions, including health flexible spending arrangements, qualified transportation fringe benefits, qualified adoption assistance programs and eligible long-term care premiums. Revenue Procedure 2021-45 also includes the indexed dollar amounts for the federal income tax-related standard deduction.

On November 4, the IRS released Notice 2021-61, which includes the qualified retirement plan limits for 2022. These limits restrict the contributions that can be made to, and benefits that can be paid from, qualified retirement plans as well as the compensation that can be used when determining benefits.

Figure 1 below includes these limits, along with the Social Security maximum taxable wage base that was announced on October 13, and the limits relevant to health savings accounts and excepted-benefit health reimbursement arrangements that were released earlier this year in Revenue Procedure 2021-25.

(Note that Revenue Procedure 2021-45 also includes the federal income tax rate tables for 2022.)

The 2022 tax-related limits potentially affect the design, administration, communication and tax reporting for retirement and benefit-related plans.

Figure 1. Inflation-adjusted limits for health, retirement and other benefit plans, 2021 vs. 2022

The 2022 tax year inflation adjustments for income tax provisions, including health flexible spending arrangements, qualified transportation fringe benefits, qualified adoption assistance programs and eligible long-term care premiums
Health flexible spending arrangements (health FSAs)
(general and limited purpose)
2021 2022
Maximum annual health FSA salary reduction contribution $2,750 $2,850
Maximum annual health FSA carryover of unused amounts from the prior plan year for plans that permit carryover $5501 $570
Qualified transportation fringe benefits 2021 2022
Monthly limitation amounts
- Transit pass and commuter highway vehicle (combined) $270 $280
- Qualified parking $270 $280
Qualified adoption assistance 2021 2022
Maximum per adoption income tax exclusion
- Child with special needs (regardless of actual expenses) $14,440 $14,890
- Other adoptions $14,440 $14,890
Adjusted gross income (AGI) tax exclusion phaseout
- Phaseout begins $216,660 $223,410
- Phaseout complete $256,660 $263,410
Dependent care assistance (including FSAs)2 2021 2022
Maximum annual dependent care assistance benefit
- Individual or a married couple filing jointly $10,500 $5,000
- Married individual filing separately $5,250 $2,500
Qualified retirement plan limits 2021 2022
Maximum recognizable compensation $290,000 $305,000
Highly compensated employee (HCE) $130,000 $135,000
Section 415 benefit limits
- Defined benefit plans $230,000 $245,000
- Defined contribution plans $58,000 $61,000
Limit on pre-tax elective deferrals
- Under age 50 $19,500 $20,500
- Age 50 and over $26,000 $27,000
Qualifying longevity annuity contract (QLAC) 2021 2022
Investment limit $135,000 $145,000
Social Security taxable wage base 2021 2022
Taxable wage base $142,800 $147,000
Eligible long-term care (LTC) premiums 2021 2022
Annual limitation on LTC premiums includible as medical care
Age before close of tax year
- Up to 40 $450 $450
- 41 to 50 $850 $850
- 51 to 60 $1,690 $1,690
- 61 to 70 $4,520 $4,510
- Over 70 $5,640 $5,640
Standard deduction 2021 2022
Filing status
- Married individuals filing jointly $25,100 $25,900
- Heads of households $18,800 $19,400
- Unmarried individuals $12,550 $12,950
- Married individuals filing separately $12,550 $12,950
Health savings accounts (HSAs) 2021 2022
Individual coverage
- Maximum annual HSA contribution $3,600 $3,650
- Minimum annual deductible for high-deductible health plan (HDHP) $1,400 $1,400
- Maximum annual out-of-pocket expenses for HDHP $7,000 $7,050
Family coverage
- Maximum annual HSA contribution $7,200 $7,300
- Minimum annual deductible for HDHP $2,800 $2,800
- Maximum annual out-of-pocket expenses for HDHP $14,000 $14,100
Catch-up contributions3
(for individuals attaining age 55 by December 31 until enrolled in Medicare)
$1,000 $1,000
Excepted-benefit HRAs (EB-HRAs) 2021 2022
- Maximum amount employers can contribute $1,800 $1,800

Footnotes

1 For plan years ending in 2020 and 2021, the Consolidated Appropriations Act, 2021 provided employers the option to allow full carryover of employees’ healthcare FSA remaining balances to the next plan year.

2 For the 2021 tax year, the American Rescue Plan Act increased the dependent care assistance limits under Internal Revenue Code (IRC) section 129 from $5,000 to $10,500 for an individual or a married couple filing jointly, and from $2,500 to $5,250 for married filing single. In 2022, these limits revert to $5,000 for an individual or married couple filing jointly and $2,500 for married filing single. These limits are not adjusted for inflation; they can only be adjusted by a legislative amendment to IRC section 129.

3 The HSA catch-up contribution amount for participants attaining age 55 by December 31 of the tax year is not adjusted for inflation; any change would require statutory amendment.

Authors


Senior Director, Retirement and Executive Compensation

Senior Regulatory Advisor, Health and Benefits

Related content tags, list of links Article Insider Health and Benefits Retirement
Contact Us