2024 Contribution Limits to Know: Retirement, FSA, HSA, and Commuter Benefits
Quick look: A new year is right around the corner, and with it comes a new set of contribution limits for retirement accounts, health savings accounts, flexible savings accounts, and commuter benefits plans. Employers and their staff should review these new figures set by the IRS and adapt their 2024 benefits plans accordingly.
2024 is almost here, and so are the Internal Revenue Service’s (IRS) new contribution limits for retirement accounts, health savings accounts, flexible savings accounts, and commuter benefit plans.
While the inflation rate declined in October—3.2% versus 3.7% in September—financial pressures remain for many Americans. Bank of America’s latest annual Workplace Benefits Report revealed that financial wellness among employees has dropped to 42%, the lowest rate since the study began in 2010. Further, the report found that 67% of workers believe the cost of living exceeds their salary/wage growth (compared to 58% in February 2022).
The following contribution limit updates take effect January 1, 2024, and will enable employees to squirrel away more funds for their retirement years, more affordably tend to their health, and save on their work commutes.
2024 retirement contribution limits
The IRS has announced that the contribution limit for workers who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan will increase from $22,500 up to $23,000.
The annual contribution limit for IRAs will increase to $7,000, up from $6,500. The IRA catch‑up contribution limit for employees aged 50 and up will remain at $1,000 (a figure amended under the SECURE 2.0 Act to adjust for the cost of living).
The catch-up contribution limit for individuals aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan will remain $7,500 in 2024. This brings the annual total that participants in these plans can contribute to $30,500 starting in 2024. The catch-up contribution limit for employees aged 50 and over participating in SIMPLE plans will stay $3,500 in 2024.
The eligible income ranges will increase in 2024 for making deductible contributions to traditional IRAs, contributing to Roth IRAs, and claiming the Saver’s Credit.
Per the IRS, “Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or the taxpayer’s spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor the spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.)”
Below are the 2024 phase-out ranges for traditional IRAs:
- Single taxpayers covered by a workplace retirement plan: The phase-out range will increase to between $77,000 and $87,000 (up from between $73,000 and $83,000).
- Married couples filing jointly: If the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range will rise to between $123,000 and $143,000 (up from between $116,000 and $136,000).
- IRA contributors who aren’t covered by a workplace retirement plan and are married to someone who is covered: The phase-out range will jump to between $230,000 and $240,000 (up from between $218,000 and $228,000).
- Married individuals filing separately who are covered by a workplace retirement plan: The phase-out range isn’t subject to an annual cost-of-living adjustment and will remain between $0 and $10,000.
For Roth IRAs, the following phase-out ranges will apply:
- Singles or heads of household who contribute to a Roth IRA: The phase-out range will grow to between $146,000 and $161,000 (up from between $138,000 and $153,000).
- Married couples filing jointly: The income phase-out range will increase to between $230,000 and $240,000 (up from between $218,000 and $228,000).
- Married individuals filing separately who contribute to a Roth IRA: The phase-out range isn’t subject to an annual cost-of-living adjustment and will remain between $0 and $10,000.
Below are the income limits for the Saver’s Credit (aka the Retirement Savings Contribution Credit) for low- and moderate-income workers:
- Married filing jointly: $76,500, up from $73,000.
- Heads of household: $57,375, up from $54,750.
- Singles and married individuals filing separately: $38,250, up from $36,500.
Additionally, the amount individuals can contribute to their SIMPLE retirement accounts will rise to $16,000, up from $15,500.
These climbing limits should allow workers to continue to boost their retirement savings rates, something that’s already on the rise—reports show that in the second quarter of 2023, 401(k) balances rose 4%.
2024 FSA limits
FSAs will also experience heightened contribution limits next year. These accounts, which can help lower medical and/or dependent care expenses, can pay for deductibles, co-pays, and coinsurance, and preschool, day camp, or after-school programs.
In 2024, workers can add an extra $150 to their FSAs as the annual contribution limit rises to $3,200 (up from $3,050). If the FSA plan allows unused FSA amounts to carry over, employees can carry over up to $640 (up from $610).
Read IRS Revenue Procedure 2024-34 >
2024 HSA limits
HSA contribution limits will substantially jump in 2024. These accounts allow employees to set aside pre-tax money from their paychecks to help pay for eligible medical, dental, or vision expenses not covered by their health plans.
Workers enrolled in a qualified high-deductible health plan (HDHP) are eligible to defer funds into an HSA. In 2024, an HDHP must have a deductible of at least $1,600 for self-only coverage or $3,200 for family coverage. Additionally, annual out-of-pocket expense maximums can’t exceed $8,050 for self-only coverage or $16,100 for family coverage.
The limit for self-only HSA coverage will be $4,150 (an almost 8% increase from $3,850); for family coverage, the limit will be $8,300 (an over 7% rise from $7,750). Those aged 55 and up will be able to contribute an extra $1,000 to their HSAs (the same as tax year 2023).
The IRS also announced the maximum amount employers can contribute to an excepted-benefit health reimbursement arrangement (HRA) in 2024 will be $2,100 (up from $1,950 in 2023).
Read IRS Revenue Procedure 2023-23 >
| 2024 | 2023 | Change | |
|---|---|---|---|
| HSA contribution limit (employer + employee) | Self-only: $4,150 Family: $8,300 |
Self-only: $3,850 Family: $7,750 |
Self-only: +$300 Family: +$550 |
| HSA catch-up contributions (age 55 or older) | $1,000 | $1,000 | No change (set by statute) |
| HDHP minimum deductibles | Self-only: $1,600 Family: $3,200 |
Self-only: $1,500 Family: $3,000 |
Self-only: +$100 Family: +$200 |
| HDHP maximum out-of-pocket amounts (deductibles, co-payments, and other amounts, but not premiums) | Self-only: $8,050 Family: $16,100 |
Self-only: $7,500 Family: $15,000 |
Self-only: +$550 Family: +$1,100 |
PEOs: A one-stop shop for benefits administration, planning, and knowledge
Many employers are turning to financial wellness benefits like the ones mentioned above to help employees strengthen their fiscal standing—the financial wellness benefits market is expected to reach $1.89 billion by 2028.
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- And more
At ExtensisHR, we believe knowledge is power and offer access to various financial wellness training sessions on budgeting, investing, retirement planning, and more.
Do you want to learn more about how a PEO can help your employees make the most of their hard-earned wages? Contact the benefits experts at ExtensisHR today.
