2022 Benefit Plan Limits

2022 Benefit Plan Limits

On November 10, 2021, the IRS released the 2022 inflationary (cost of living) adjustments relating to several types of benefits. Below are select highlights from IRS Revenue Procedure 2021-45.

Flexible Spending Account (FSA) CapThe limit on the amount that can be contributed to a health flexible spending account (FSA) through voluntary salary reductions for plan years beginning in 2022 increased to $2,850, up from $2,750 in 2021.

Carryover. .For cafeteria plans that permit a carryover of unused amounts, the maximum carryover limit is increased to $570 in 2022, up from $550 in 2021.

Qualified Transportation Fringe BenefitsWith regard to transportation expenses reimbursed by an employer and excludable from the employee’s income under a qualified transportation program, the limits increase for 2022:

2022

2021

Commuter Highway Vehicle (van pooling) and

Any Transit Pass

$280

$270

Qualified Parking

$280

$270

As a reminder, the Tax Cuts and Jobs Act (TCJA) suspended the employer’s deductibility of qualified transportation expenses, effective January 1, 2018.  The tax exclusion available to employees remains applicable.  In addition, the TCJA suspended the qualified bicycle commuter benefit from December 31, 2017 through December 31, 2025.  An employer sponsoring a qualified bicycle fringe benefit plan can still take a tax deduction (up to $20 per month, or $240 annually) for reimbursing participating employees who use a bicycle for traveling between their home and place of employment.  However, these amounts can no longer be excluded from the employee’s income.

Qualified Adoption Assistance Reimbursement Program (IRC §137).An employer-provided adoption assistance program that meets the qualifications of IRC §137, allows participants to recover expenses relating to adoption, such as reasonable adoption fees, court costs, attorney’s fees and traveling expenses. Below are the exclusion limits and AGI phase-out limits for 2022 and 2021:

  2022 2021
Exclusion Limit $14,890 $14,440
AGI Phase-out Limits Between $223,410 and $263,410 Between $216,660 and $256,660

Health Savings Accounts. The 2022 annual limits applicable to health savings accounts were released earlier this year (see 2022 COLAs for HSAs and EB-HRAs, Benefit Beat, 5/11/21).

Archer Medical Savings Accounts. The Archer MSA pilot project ended on December 31, 2007; therefore, no new MSAs could be established after that date. For existing MSAs, the annual deductible limits of a high deductible health plan used in conjunction with an Archer medical savings account for 2021 are slightly increased:

2022

2021

Single

Family

Single

Family

HDHP Annual Deductible

Between $2,450 and $3,700

Between $4,950 and $7,400

Between $2,400 and $3,60

Between $4,800 and $7,150

Out-of-Pocket Expenses

$4,950

$9,050

$4,800

$8, 750

Long-Term Care Premiums. The IRS limitations relating to eligible long-term care premiums includible as medical care, as defined by IRC §213(d) are:

Age at end of tax year

2022 Premium Limit

2021 Premium Limit

<40

$450

$450

>40 but <50

$850

$850

>50 but <60

$1,690

$1,690

>60 but <70

$4,510

$4,520

>70

$5,640

$5,640

Small Business Tax Credit (SBTC).Small businesses and tax-exempt employers who provide health care coverage to their employees under a qualified health care arrangement are entitled to a tax credit, as established by the Affordable Care Act. To be eligible for the small business tax credit, the employer must employ fewer than 25 full-time equivalent employees whose average annual wages are less than $57,400 (indexed for 2022; the wage ceiling in 2021 is $55,600). The tax credit phases out for eligible small employers when the number of its full-time employees (FTEs) exceeds 10; or, when the average annual wages for the FTEs exceeds $28,700 in the 2022 tax year (the phase-out wage limit in 2021 is $27,800). As a reminder, only qualified health plan coverage purchased through a SHOP marketplace is available for the tax credit, and only for a 2-consecutive year period.

QSEHRA Payments and Reimbursements. A qualified small employer health reimbursement arrangement, known as a “QSEHRA”, allows eligible small employers (those employing fewer than 50 employees and who do not offer health coverage) to reimburse health insurance premium for individual coverage purchased either through or outside the marketplace. Such arrangement must meet certain criteria, specifically, the QSEHRA:

  • Must be funded solely by the eligible small employer; no salary reduction contributions can be made under this arrangement; and,
  • Provides, following the employee’s proof of coverage, for the payment or reimbursement for medical care expenses, as defined in IRC Section 213(d)), including premium for health coverage through the individual market, incurred by the eligible employee or his/her family members. For 2021, the annual amount of payments and reimbursements is capped at $5,300 for employee-only, or $10,700 for arrangements that provide for payments or reimbursements for the employee’s family members. Both of these limits are subject to inflationary adjustments. Accordingly, beginning in 2022, the total amount of payments and reimbursements is increased to $5,450 for employee-only; $11,050 for family coverage).As a reminder, the total amount of permitted benefits received under a QSEHRA must be reported in Box 12, using Code FF of the Form W-2.

With regard to excepted benefit HRAs, the IRS previously announced that the maximum contribution amount for plan years beginning in 2022 remains at $1,800 (see May 2021 Benefit Beat).

Premium Tax Credit for Coverage under a Qualified Health Plan .Individuals who buy coverage through the marketplace and meet certain income criteria may be eligible for an advance credit payment wherein a portion of the premium is made directly to the insurer to cover the cost of coverage. The amount of an individual’s premium tax credit is reduced by the amount of any advance credit payments made during the year. If the advance credit payment for a taxable year exceeds the premium tax credit limit, the individual would owe the excess as additional tax, subject to certain inflationary limits. For tax years beginning in 2022, the limitation on tax imposed for excess advance credit payments is determined using the following table:

Household Income (as percent of poverty line) Limitation amount for unmarried individuals (other than surviving spouse and head of household) Limitation amount for all other taxpayers
Under 200% $325 $650
Between 200% and 300% $825 $1,650
Between 300% and 400% $1,400 $2,800 


The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. This information is provided as general guidance and may be affected by changes in law or regulation. This information is not intended to replace or substitute for accounting or other professional advice. You must consult your own attorney or tax advisor for assistance in specific situations. This information is provided as-is, with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.

2022 Benefit Plan Limitshttps://www.cbiz.com/Portals/0/Images/2022 Benefit Plan Limits - FSA.jpg?ver=Z02bK4EKvJuHCZeKHpEkRg%3d%3dOn November 10, 2021, the IRS released the 2022 inflationary (cost of living) adjustments relating to several types of benefits. 2021-11-10T20:00:00-05:00On November 10, 2021, the IRS released the 2022 inflationary (cost of living) adjustments relating to several types of benefits.  Regulatory, Compliance, & LegislativeEmployee Benefits ComplianceNo