What the new IRS 2022 Cost-of-Living Adjustments Mean for Your Benefit & Retirement Accounts
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The IRS has released its 2022 cost-of-living adjustments (COLAs) in response to inflation- which can impact certain benefit accounts, retirement plans and other programs.
A wide variety of tax-related benefit accounts will see a change in their limits for 2022 including FSAs, qualified fringe transportation and parking benefits, qualified small employer health reimbursement arrangements (QSEHRAs), adoption assistance, and 401(k) plans.
The adjusted amounts generally apply for plan years beginning in 2022. Some of the adjusted amounts, however, apply to calendar year 2022.
Highlights of changes coming in 2022:
FSA Contributions: Contributions to a healthcare flexible spending account have increased $100 to $2,850- up from $2,750 in 2021.
FSA Carryover Amount: If the employer allows for carry-over, FSA participants can now carry over $570 - up $20 from $550 in 2021.
Transit & Parking Benefits: The monthly contribution limit on parking and transit benefits will increase to $280 - up from $270 in 2021.
Adoption Assistance Program: The maximum exclusion for qualified adoption expenses under the adoption assistance program is now $14,890- up from $14,400 in 20201.
401(k) Plans: Next year taxpayers can put an extra $1,000 into their 401(k) plans. The 2022 contribution limit for 401(k) plans will increase to $20,500.
| Taxable Years Beginning in 2022 | Taxable Years Beginning in 2021 | |
| Limit on voluntary employee salary reduction contributions to a health flexible spending arrangement (Section 3.16 of Rev. Proc. 2021-45) | $2,850 | $2,750 |
| Maximum carryover amount of unused FSA amounts (Section 3.16 of Rev. Proc.2021-45 | $570 | $550 |
| Monthly limit on fringe benefit exclusion for transit and parking (Section 3.17 of Rev. Proc. 2021-45) | $280 | $270 |
| Maximum exclusion for qualified adoption expenses furnished pursuant to an adoption assistance program (Section 3.19 of Rev. Proc. 2021-45) | $14,890 | $14,300 |
| Maximum contribution limit for employees contributing to a 401(k), 403(b) or 457 plan (Notice 2021-61) | $20,500 | $19,500 |
The above chart does not include all the provisions under the cost-of-living adjustment.
For a full break down of the changes made by the IRS for benefit and retirement account contributions, please visit:
- Procedure 2021- 45 (Benefit Accounts)
- Notice 2021-61 (Retirement Plans)
