Mercer projects the 2023 limits for qualified transportation (parking and transit) benefits and health flexible spending arrangements (FSAs) will increase substantially from 2022 levels. These unofficial 2023 limits are determined using the Internal Revenue Code (IRC)’s cost-of-living adjustment methods, the Chained Consumer Price Index for All Urban Consumers (C-CPI-U) values through June and Mercer’s projected C-CPI-U for July and August. While adoption assistance program limits generally use the same indexing formula, they can’t be reliably projected due to the small rounding threshold. IRS usually announces these benefit limits — along with long-term care limits (based on the medical component of the C-CPI-U for August) — for the coming year in October or November.
Limits for qualified transportation fringe benefits and health FSAs are expected to rise significantly in 2023, thanks to the dramatic increase in C-CPI-U for the year (an eye-popping 7.0% for the 10 months ending June 2022). The inflationary increases are the largest since indexing on the transportation fringe benefit began in 1999 and more than three times as large as the average annual increase.
