The Internal Revenue Service (IRS) unveiled its annual adjustments for the upcoming year, and among the updates include the changes in transportation fringes and flexible spending arrangements (FSAs). These changes outlined in Rev. Proc. 2023-34, released on November 9th, 2023, shed light on the cost-of-living adjustments (COLAs) for 2024, signaling notable shifts in various financial parameters. A COLA is an increase made to Social Security and Supplemental Security Income (SSI) to counteract the effects of inflation.
Enhancements In Transportation Fringes And Qualified Parking
In 2024, employers can exclude from gross income amounts related to qualified transportation fringe benefits and parking. The new threshold for exclusion has risen to $315 per month, a substantial jump from the previous year’s $300. This upward adjustment reflects the evolving landscape of transportation costs and seeks to provide individuals with additional financial flexibility.
Flexibility And Expansion In Flexible Spending Arrangements (FSAs)
The changes don’t stop there. The dollar limitation for voluntary employee salary reductions saved for contributions to health FSAs has been raised to $3,200 for plan years starting in 2024, up from $3,050 in 2023. This upward revision allows individuals to allocate more pre-tax income toward their health care expenses, potentially alleviating the financial burden of medical costs.
In addition, for those utilizing cafeteria plans allowing the carryover of unused amounts in FSAs, the maximum carryover amount has been adjusted to $640, up from $610 in the previous year. This enhancement in the maximum carryover amount allows individuals to retain a more significant portion of their unspent funds, providing a safety net for unforeseen medical expenditures.
Additional information about the complete coverage will be in Payroll Currently.
Implications For Employers And Individuals
Employers will need to reassess their benefit offerings and adjust them in accordance with the updated limits. This entails revisiting policies related to transportation benefits, FSAs, and cafeteria plans to ensure compliance with the new thresholds. In addition, individuals should leverage these revised limits to optimize their tax savings and health care budgeting for the upcoming year.
The Assistance Of A PEO
The 2024 IRS cost-of-living adjustments bring pivotal changes in transportation fringes and FSAs, offering avenues for optimized tax planning and health care budgeting. However, for businesses navigating these updates, the complexities might be challenging. Fortunately, a professional employer organization (PEO) like GMS is here to help. A PEO assists with ensuring compliance with these revisions and provides expertise in managing benefits, payroll, HR, and the intricacies of changing regulations. Collaborating with a PEO can empower businesses to seamlessly adapt, leveraging these updates to enhance employee benefits and streamline operations with evolving IRS standards. Embracing these changes with the support of a PEO could be the catalyst for businesses to thrive in the dynamic financial landscape of 2024 and beyond. Contact our HR experts today to learn more.