Many employee benefits are subject to annual dollar limits that are periodically increased for inflation. The IRS recently announced cost-of-living adjustments to the annual dollar limits for various welfare and retirement plan limits for 2020.
Although some of the limits will remain the same, many of the limits will increase for 2020.
Employers should update their benefit plan designs for the new limits, and communicate the new benefit plan limits to employees.
HDHPs and HSAs
The health savings account (HSA) contribution limits will increase to $3,550 for individuals and $7,100 for families, effective Jan. 1, 2020. However, the catch-up contribution for HSA-eligible individuals who are age 55 and older will remain at $1,000.
For plan years beginning on or after Jan. 1, 2020, the high deductible health plan (HDHP) minimum deductible will increase to $1,400 for individuals and $2,800 for families. The HDHP maximum out-of-pocket limit will increase to $6,900 for individuals and $13,800 for families.
The health flexible spending account (FSA) dollar limit on employee salary reduction contributions is $2,750 for taxable years beginning in 2020. There is no change for dependent care FSA contributions.
401(k) Plan Contributions
The employee elective deferrals for 401(k) contributions and catch-up contributions will both increase $500 for 2020. The pre-tax contribution limit will increase to $19,500. The limit on catch- up contributions will increase to $6,500.
Transportation Fringe Benefits
The monthly limits on transit pass and vanpooling (combined), and parking will increase $5 each for 2020, bringing the monthly limits for each to $270.
Adoption Assistance Benefits
The annual tax exclusion for adoption assistance benefits will also increase from $14,080 to $14,300 for 2020.
For More Information
Contact us today to learn more about the updated limits, or for copies of employee communications that detail these changes.