Employee Benefits Compliance Alert
Compliance Alert: IRS Adjusts Health Flexible Spending Account and Other Benefit Limits For 2022
Nov 15, 2021
On November 10, 2021, the Internal Revenue Service (IRS) released Revenue Procedure 2021-45, which increases the health flexible spending account (FSA) salary reduction contribution limit from 2021 to $2,850 for plan years beginning in 2022, an increase of $100 from 2021. Thus, for health FSAs with a carryover feature, the maximum carryover amount is $570 (20% of the $2,850 salary reduction limit) for plan years beginning or ending in 2022.
The Revenue Procedure also contains the cost-of-living adjustments that apply to dollar limitations in certain sections of the Internal Revenue Code.
Qualified Commuter Parking and Mass Transit Pass Monthly Limit
For 2022, the monthly limits for qualified parking and mass transit are increased to $280 each, an increase of $10 from 2021.
Adoption Assistance Tax Credit Increase
For 2022, the credit allowed for adoption of a child is $14,890 (up $450 from 2021). The credit begins to phase out for taxpayers with modified adjusted gross income in excess of $223,410 (up $6,750 from 2021) and is completely phased out for taxpayers with modified adjusted gross income of $263,410 or more (up $6,750 from 2021).
Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) Increase
For 2022, reimbursements under a QSEHRA cannot exceed $5,450 (single) / $11,050 (family), an increase of $150 (single) / $350 (family) from 2021.
Reminder: 2022 HSA Contribution Limits and HDHP Deductible and Out-of-Pocket Limits
Earlier this year, the IRS announced the inflation adjusted amounts for HSAs and high deductible health plans (HDHPs).
| 2022 (single/family) | 2021 (single/family) | |
|---|---|---|
| Annual HSA Contribution Limit | $3,650 / $7,300 | $3,600 / $7,200 |
| Minimum Annual HDHP Deductible | $1,400 / $2,800 | $1,400 / $2,800 |
| Maximum Out-of-Pocket for HDHP | $7,050 / $14,100 | $7,000 / $14,000 |
The ACA’s out-of-pocket limits for in-network essential health benefits have also increased for 2022. Note that all non-grandfathered group health plans must contain an embedded individual out-of-pocket limit if the family out-of-pocket limit is above $8,700 (2022 plan years). Exceptions to the ACA’s out-of-pocket limit rule are also available for certain small group plans eligible for transition relief (referred to as “Grandmothered” plans). Unless extended, relief for Grandmothered plans ends December 31, 2022.
| 2022 (single/family) | 2021 (single/family) | |
|---|---|---|
| ACA Maximum Out-of-Pocket | $8,700 / $17,400 | $8,550 / $17,100 |
ACA Reporting Penalties (Forms 1094-B, 1095-B, 1094-C, 1095-C)
The table below describes late filing penalties for ACA reporting. The 2023 penalty is for returns filed in 2023 for calendar year 2022, and the 2022 penalty is for returns filed in 2022 for calendar year 2021. Note that failure to issue a Form 1095-C when required may result in two penalties, as the IRS and the employee are each entitled to receive a copy.
| Penalty Description | 2023 Penalty | 2022 Penalty |
|---|---|---|
| Failure to file an information return or provide a payee statement |
$290 for each return with respect to which a failure occurs | $280 for each return with respect to which a failure occurs |
|
$3,532,500 | $3,426,000 |
|
$1,177,500 | $1,142,000 |
| Failures corrected within 30 days of required filing date | $50 | $50 |
|
$588,500 | $571,000 |
|
$206,000 | $199,500 |
| Failures corrected by August 1 | $110 | $110 |
|
$1,766,000 | $1,713,000 |
|
$588,500 | $571,000 |
| Failure to file an information return or provide a payee statement due to intentional disregard | $580 for each return with respect to which a failure occurs (no cap) | $570 for each return with respect to which a failure occurs (no cap) |
About the authors. This alert was prepared for Woodruff Sawyer by Marathas Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act. Contact Stacy Barrow or Nicole Quinn-Gato at sbarrow@marbarlaw.com or nquinngato@marbarlaw.com.
The information provided in this alert is not, is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the agency, our lawyers or our clients. This is not legal advice. No client-lawyer relationship between you and our lawyers is or may be created by your use of this information. Rather, the content is intended as a general overview of the subject matter covered. This agency and Marathas Barrow Weatherhead Lent LLP are not obligated to provide updates on the information presented herein. Those reading this alert are encouraged to seek direct counsel on legal questions.
© 2021 Marathas Barrow Weatherhead Lent LLP. All Rights Reserved.
Table of Contents
