New 2024 limits for FSAs and 401(k)s announced

The U.S. Internal Revenue Service (IRS) announced on November 9 that employees can contribute an extra $150 into their health flexible spending accounts (FSAs) in 2024.

The annual contribution limit is increasing to $3,200, up from $3,050 in 2023. If an employer’s plan allows the carryover of unused FSA amounts, employees can carry over up to $640 in 2024. That is an increase of $30 over the 2023 carryover amount of $610.

The FSA announcement comes on the heels of the IRS’s announcement for the 2024 401(k) annual contribution limit, which was released by the IRS on November 1.

This announcement states that starting in 2024, employees can contribute up to $23,000 into their 401(k), 403(b), most 457 plans or the Thrift Savings Plan for federal employees. That’s up $500 from the 2023 limits.

The catch-up contribution limit for employees ages 50 and older will remain at $7,500, the same amount as 2023.

The limit on total employer-plus-employee contributions to defined contribution plans will increase to $69,000 in 2024, up from $66,000 in 2023.

Employers should share this information with employees to help them plan financially for the upcoming year, and for the years ahead. This could be done at the same time other benefits information is communicated, since many employers are in the middle of their open enrollment periods. These new limits could also be announced in a separate employee communication.

Key to remember: The IRS increased the amounts employees can contribute to FSAs and 401(k)s in 2024. This information should be shared with employees to help them plan their financial futures.