In addition to all the new 2024 employment laws, employers should be aware that the Internal Revenue Service (IRS) has released the 2024 annual inflation adjustments for certain health and retirement benefits. Employers may want to communicate these upcoming changes for 2024 to health saving accounts (HSAs), health flexible spending arrangements (FSAs) and retirement plan contribution limits — especially during open enrollment.
Health Savings Accounts (HSAs)
HSAs are pre-tax accounts only available to individuals covered under a high-deductible health plan with a minimum annual deductible (not applicable to preventative services), allowing eligible individuals to accumulate money, tax-free, to pay for qualified medical expenses. The HSA limits, which are indexed for inflation every year, will increase in 2024.
- $4,150 for self-only coverage (an increase of $300 from 2023); and
- $8,300 for family coverage (an increase of $550 from 2023).
For calendar year 2024, a high-deductible health plan is defined as a health plan with an annual minimum deductible of:
- $1,600 for self-only coverage ($1,500 in 2023); or
- $3,200 for family coverage ($3,000 in 2023).
For plan years beginning in 2024, the maximum amount that may be made newly available for an excepted benefit HRA is $2,100.
Flexible Spending Arrangements (FSAs)
In 2024, eligible employees may annually contribute up to $3,200 to an FSA — also called a flexible spending account — which is an increase of $150 from 2023. For cafeteria plans that permit the carryover of unused amounts, the 2024 maximum carryover amount is $640, an increase of $30 from 2023.
Throughout the year, FSAs allow employees to pay for qualified medical expenses not covered by their health plan, including co-pays, deductibles, and a variety of medical products and services ranging from dental and vision care to eyeglasses and hearing aids.
Before the plan year begins, employees will need to decide how much to contribute through payroll deductions, and because FSAs include a use-or-lose provision, employers are encouraged to remind their employees to only contribute what they truly think they’ll spend — otherwise employees’ unspent funds will be forfeited.
Retirement Plan Contributions
In 2024, individuals can contribute $23,000 — an increase of $500 from 2023 — to their 401(k), 403(b) and most 457 plans, as well as the federal government’s Thrift Savings Plan. The catch-up contribution limit for employees aged 50 and over who participate in any of these retirement plans remains $7,500 for 2024, meaning those participants can contribute up to $30,500 starting in 2024.
Additionally, the limit on annual contributions to an Individual Retirement Arrangement (IRA) increases to $7,000, up from $6,500 in 2023.
View 2024 increased income ranges for determining eligibility to make deductible contributions to traditional IRAs, to contribute to Roth IRAs and to claim the Saver’s Credit.
Katie Culliton, Editor, CalChamber