On November 1, 2023, the Internal Revenue Service (IRS) announced cost-of-living adjustments to the dollar limits on benefits and contributions in retirement plans for 2024. These adjustments are in addition to previously announced increases in limits to other employee benefit plans. In addition, the Social Security Administration recently announced the cost-of-living adjustment to the Social Security wage base for 2024.

The updated limits for 2024, as compared to last year’s limits, are set forth in the charts below.

The Social Security Administration announced the cost-of-living adjustment to the Social Security contribution and benefit base (also known as the taxable wage base) for 2023.

 

Note: Federal Insurance Contributions Act (FICA) tax rates remain unchanged. The Old-Age, Survivors, and Disability Insurance (OASDI) tax of 6.20 percent each for employers and employees (12.4 percent for self-employed individuals) applies to wages up to the Social Security annual taxable wage base. The Medicare tax of 1.45 percent each for employers and employees is not limited to the taxable wage base and applies to all wages. An additional Medicare tax of 0.9 percent for employees only applies to all wages over specified income thresholds based on filing status ($250,000 for married filing jointly, $125,000 for married filing separately, and $200,000 for all other taxpayers).

The health savings account (HSA) and HDHP limits are as follows:

 

The flexible spending account limits are as follows:

Transit and parking fringe benefits limit

 

Action items for employers

Employers are encouraged to:

  • Update any plan documents that identify the annual limitations
  • Update participant communications as the limits may impact important benefit elections for 2024
  • Update Human Resource Information Systems (HRIS) and/or payroll systems with new limitations for administration, recordkeeping and tax reporting
  • Ensure all vendor data feeds are updated to comply with the new limits