Contribution limits were announced by the IRS on October 9, 2026. These 2026 cost-of-living adjustments (COLAs) affect contribution limits for various tax-advantaged accounts in Rev. Proc. 2025-32, including Flexible Spending Accounts (FSAs).
2026 Benefit Limits at a Glance:
- Health Care FSA: maximum contribution limit $3,400
- Transportation Plans: transit and parking allowances $340
- Adoption Assistance program maximum excludable amount $17,670
- Adoption Tax Credit is $17,670
Download the latest benefit contribution limits. Ver en Español
What are Cost-of-Living Adjustments?
Cost-of-living adjustments help preserve the value of benefits by accounting for inflation. Each year, the IRS updates contribution limits to reflect economic changes. For HR professionals, staying informed about these updates is essential for maintaining compliant and competitive benefit programs.
On October 9, 2025, the IRS announced several key updates affecting FSAs and other tax-advantaged accounts for the 2026 plan year.
New FSA Contribution Limits for 2026
The Health Care FSA limit for 2026 has been raised to $3,400, allowing employees to set aside more pre-tax dollars for eligible medical expenses. This increase offers greater financial flexibility and potential tax savings.
HR Action Items:
- Update payroll systems and employee communications
- Educate employees on how maximizing FSA contributions can reduce taxable income
FSA Carryover Limit Increase
The carryover limit for unused FSA funds has also increased to $680 for 2026. This change provides added flexibility for employees who may not use their full FSA balance within the plan year.
Qualified Transportation and Parking Benefits
The IRS has increased the monthly pre-tax limit for transit and parking benefits to $340. This adjustment helps employees save more on commuting expenses.
HR Pro Tip: Some cities have enacted mandatory commuter benefit ordinances. Employers should review their programs to ensure compliance and update employee materials accordingly.
Adoption Assistance & Tax Credit Updates
The maximum excludable amount for employer-sponsored adoption assistance programs is now $17,670. Additionally, the Adoption Tax Credit has been raised to the same amount, helping families offset the rising costs of adoption.
HR Pro Tip: Provide resources and guidance to help employees understand and claim these valuable benefits.
Health Savings Account (HSA) Contribution Limits
Announced earlier this year:
- Individual HSA Contribution Limit: $4,400
- Family HSA Contribution Limit: $8,750
These contribution limit increases support long-term healthcare savings and offer additional tax advantages.
Retirement Plan Contribution Limits
The IRS has not yet released the 2026 retirement plan COLA updates.
ICYMI: Final IRS Regulations on 401(k) Catch-Up Contributions
- Roth catch-up contributions required for high earners
- New “Super Catch-Up” for ages 60–63
- IRS correction methods for catch-up errors
- Key deadlines and next steps for employers
- FAQs for plan sponsors
Engaging Employees Throughout Their Benefits Journey
These annual IRS contribution limit updates are more than compliance checkpoints; they’re key moments to connect with your workforce. Open enrollment is a prime opportunity to spotlight new contribution limits and educate employees on how to optimize their benefits. But engagement shouldn’t stop there.
Employees interact with their benefits throughout the year, whether it’s using FSAs for healthcare expenses, adjusting HSA contributions, or exploring adoption assistance. That’s why ongoing education is essential. Regular touchpoints, timely reminders, and accessible resources empower employees to make informed decisions that support their financial and personal well-being.
HR teams play a vital role in creating a culture of benefits awareness. By keeping employees informed and engaged year-round, organizations can boost participation, improve satisfaction, and strengthen retention.
Reach out to Navia if you’d like to explore our educational materials and how we can support you.