Employee and Retiree Benefits Changes for 2023
The last in a series of columns on how things are different this year.
Over the past two weeks, we’ve looked at benefits changes for 2023 affecting current employees and retirees. Let’s wrap up our overview of the new year by examining those that could affect both groups.
Federal Employees Health Benefits Program
The annual inflation-adjusted limit on Health Savings Account contributions for self-only coverage is $3,850, up from $3,650 in 2022. The HSA contribution limit for self plus one or family coverage is $7,750, up from $7,300. The adjustments represent a 5.5% increase over 2022 contribution limits, whereas these limits rose by 1.4% between 2021 and 2022. This amount is reduced if your high deductible health plan provides a contribution to your HSA account.
If both spouses have eligible self-only coverage, each spouse can contribute up to $3,850 in separate accounts. The ability to make tax-free HSA contributions is the primary advantage of a high deductible health plan. Be sure to fund your HSA if you are eligible and enrolled in a high deductible FEHB plan.
Federal Long-Term Care Insurance Program
As of Dec. 19, 2022, the Office of Personnel Management has suspended applications for coverage under FLTCIP, in anticipation of substantial premium increases. People not currently enrolled can’t apply for coverage, and current enrollees can’t apply to increase coverage. The suspension will remain in effect for two years, unless OPM decides to end or extend the suspension period.
Some FLTCIP policy premiums are already increasing in 2023. If you’re affected, you should have received a notice in the mail in May 2022.
Children’s Survivor Annuities
Cost of living adjustment rates under the Civil Service Retirement System apply to children’s survivor annuity benefits regardless of whether the parent who provided the benefit was covered under CSRS or the Federal Employees Retirement System. However, under FERS, children’s benefits are offset by benefits payable under Title II of the Social Security Act. In most cases, the Social Security benefit will exceed the FERS benefit, meaning the child would not get a FERS benefit.
The following rates apply from Dec. 1, 2022 through Nov. 30, 2023:
- When the child has a living parent who was married to the deceased employee or retiree, the benefit is the lesser of $635 per month per child or $1,905 per month divided by the number of eligible children (if more than three).
- When the child has no living parent who was married to the deceased employee or retiree, the benefit is the lesser of $763 per month per child, or $2,289 per month divided by the number of eligible children (if more than three).
Changes to retirement savings limits and adjustments include:
- The limit on annual contributions to an individual retirement account has increased to $6,500.
- The IRA catch‑up contribution limit for individuals age 50 and over is not subject to an annual cost‑of‑living adjustment and remains $1,000.
- The phase‑out ranges for deducting contributions to a traditional IRA have increased. The income phase-out range for people making contributions to a Roth IRA will increase for taxpayers filing as single, head of household and married filing jointly. IRS Notice 2022-55 provides more details.
- The income limit for the retirement saver's credit for low and moderate income workers is now $73,000 for married couples filing jointly; $54,750 for heads of household; and $36,500 for singles and married individuals filing separately.
There are a lot of moving parts in the federal retirement benefits system. It’s a good idea to keep an eye on the annual changes to make sure you know what’s ahead for you.