R.Bujan – Managing Director
As we look ahead to 2026, several important updates are coming to employee benefit programs. These changes, driven by IRS inflation adjustments and new legislation, impact how much employees and employers can contribute to tax-advantaged accounts and programs. Here’s what you need to know:
1. HSA & HDHP Limits Are Increasing
On May 1, 2025, the IRS released new inflation-adjusted limits for Health Savings Accounts (HSAs) and High Deductible Health Plans (HDHPs) for 2026:
- HSA Contribution Limits:
- Self-only coverage: $4,400 (up $100 from 2025)
- Family coverage: $8,750 (up $200 from 2025)
- Catch-up contribution (age 55+): $1,000 (unchanged)
- HDHP Minimum Deductibles:
- Self-only: $1,700 (up $50)
- Family: $3,400 (up $100)
- HDHP Maximum Out-of-Pocket Limits:
- Self-only: $8,500 (up $200)
- Family: $17,000 (up $400)
Action Steps: Employers should review plan cost-sharing limits and update communications for open enrollment to reflect these new numbers.
2. Dependent Care FSA (DCAP) Limit Gets a Major Boost
Thanks to the One Big Beautiful Bill Act (OBBB Act), the maximum annual contribution limit for Dependent Care FSAs jumps for 2026:
- New Limits:
- Single/married filing jointly: $7,500 (up from $5,000)
- Married filing separately: $3,750 (up from $2,500)
This is the first permanent increase since 1986 (excluding temporary COVID-19 changes).
Action Steps: Employers should assess the impact on nondiscrimination testing, update plan documents, and communicate the new limits during open enrollment.
3. Health FSA Limits & Carryover Amounts Rise
The IRS also announced new limits for Health FSAs:
- Employee Pre-tax Contribution Limit: $3,400 (up $100 from 2025)
- Maximum Carryover Amount: $680 (up $20 from 2025)
Employers may set lower limits, but cannot exceed these maximums.
Action Steps: Confirm plan documents reflect the new limits and inform employees at enrollment.
4. Qualified Transportation Fringe Benefits: Higher Monthly Limits
For 2026, the IRS increased the monthly limits for transportation benefits:
- Transit Pass/Commuter Vehicle: $340/month (up from $325)
- Qualified Parking: $340/month (up from $325)
Both employee pre-tax salary deferrals and employer-paid benefits count toward these limits. Note: Employers cannot deduct these benefits for tax purposes since 2018.
Action Steps: Update payroll and benefit systems to reflect the new limits and communicate changes to employees.
Final Thoughts
These updates mean more flexibility and higher savings potential for employees, but also require employers to review plan documents, ensure compliance, and communicate changes clearly. As always, consult with your benefits advisor or legal counsel to ensure your plans are up to date.
