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Mastering The 2024 IRS Changes For Employees

Mastering The 2024 IRS Changes For Employees

To empower employees and enhance their financial well-being, the Internal Revenue Service (IRS) has announced exciting updates for 2024. Among these changes is a noteworthy increase in the annual contribution limit for health flexible spending accounts (FSAs). This boost allows employees to contribute an extra $150 to their FSAs, providing greater flexibility and financial relief for health care expenses.

Healthy FSA Contributions On The Rise

Starting in 2024, employees can contribute up to $3,200 to their health FSAs, increasing from the $3,050 limit in 2023. Although this rise is slightly smaller than last year’s $200 hike, it remains a significant improvement, enabling individuals to allocate more funds towards their health and wellness needs.

Carryover Benefits For Employees

There's more good news for those fortunate enough to have employers with plans allowing the carryover of unused health FSA amounts. In 2024, employees can carry over up to $640, an increase of $30 from $610 in 2023. This added flexibility ensures that hard-earned dollars don’t go to waste and can be used to cover future health care expenses.

Timely Announcements Amid Open Enrollment

The IRS’s announcement comes later than usual, catching many organizations amid open enrollment. Nevertheless, the timing allows employees and employers to consider the updated contribution limits and carryover options, allowing them to make informed decisions during the open enrollment period.

A Holistic View Of IRS Updates

The health FSA adjustments are part of a broader set of inflation-related modifications released by the IRS. These include updates to the 401(k) annual contribution limit and the annual health savings account (HSA) limits, emphasizing the government’s commitment to supporting individuals in their financial planning for the future.

Increased Adoption Assistance

The IRS has also raised the maximum credit allowed for adoptions to $16,810 in 2024, up from $15,950 in 2023. This positive development aims to ease the financial burden on families seeking to adopt and encourages a supportive environment for adoptive parents.

Enhancements To Small Employer HRAs

Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) have seen an increase in individual and family coverage limits. The QSEHRA is a simple, cost-controlled alternative to group health insurance for small businesses and nonprofits with fewer than 50 full-time equivalent employees (FTEs).

In 2024, the total amount of payments and reimbursements cannot exceed $6,150 for individual coverage and $12,450 for family coverage, providing small businesses with additional tools to support their employees’ health care needs.

Improved Commuting Benefits

Employees can also look forward to increased commuting benefits. Starting next year, the monthly limits for the aggregate fringe benefit exclusion amount for transportation and transit passes will rise to $315, up from $300 in 2023. This positive adjustment recognizes the changing landscape of work and acknowledges the importance of flexible commuting options.

Maximizing Employee Benefits

Business owners should be particularly attentive to the updated health FSA contribution limits for 2024, as it directly impact their employees’ overall compensation packages and well-being. Staying informed about these changes allows employers to position themselves as proactive advocates for their workforce, fostering a positive workplace culture and improving employee satisfaction.

In addition, the complexity of managing these adjustments underscores the importance of having robust benefits administration systems in place. This is where a professional employer organization (PEO) like GMS can step in and play a crucial role. PEOs specialize in handling HR tasks, including benefits administration, relieving business owners of the administrative burdens associated with staying compliant and up-to-date with ever-changing regulations. Partnering with a PEO ensures that businesses are well-informed about regulatory changes and allows them to streamline benefits management, providing a comprehensive solution for employers and employees. GMS is here to help wherever needed. Contact us today to learn more.

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