The IRS has announced the 2026 contribution limits for Flexible Spending Accounts (FSAs), bringing notable changes that both employers and employees should be aware of. Here’s a breakdown of what’s new and how it impacts your benefits planning.

💰 Health Care FSA (HCFSA)

• 2026 Limit: $3,300 per year
• Carryover: Up to $660 (20% of the annual limit)

This allows employees to set aside more pre-tax dollars for medical expenses, providing greater flexibility in managing healthcare costs.

Looking ahead, based on inflation adjustments and IRS projections, this limit may increase to $3,400 in 2026. While the official 2026 figure has not yet been announced, employers and employees can plan accordingly to maximize contributions and savings.

Why This Matters:

• Covers a wide range of eligible expenses, including co-pays, prescriptions, dental cleanings, vision care, and certain over-the-counter items.
• Reduces taxable income, saving employees money while covering healthcare costs.
• Helps individuals budget for routine and unexpected medical expenses without dipping into savings.

Tips for Maximizing Your Health Care FSA:

1. Plan ahead by estimating annual healthcare costs to make the most of contributions.
2. Keep detailed receipts for all eligible expenses.
3. Use the carryover provision strategically if your plan allows it.
4. Coordinate contributions with other benefits like HSAs or wellness programs to maximize savings.

---

👶 Dependent Care FSA (DCFSA)

• 2026 Limit: $7,500 per year per household, regardless of marital status
• Catch-Up Contributions: $3,750

What is a Catch-Up Contribution? Married individuals filing separately can contribute an additional $3,750, allowing each spouse to maximize their benefits. Single employees, heads of household, and jointly filing couples do not get a catch-up contribution — the $7,500 limit applies to them.

The significant annual contribution increase from the previous $5,000 limit offers more financial relief for families managing childcare or dependent care expenses.

Why This Matters:

• Reduces taxable income, which can save hundreds or even thousands of dollars annually.
• Makes it easier to budget for childcare and dependent care costs throughout the year.
• Encourages families to use pre-tax dollars for eligible expenses, stretching their dollars further.

Tips for Maximizing Your DCFSA:

1. Estimate your dependent care costs carefully to avoid over- or under-contributing.
2. Keep detailed receipts for daycare, babysitting, or eldercare services.
3. Coordinate contributions with your employer’s payroll schedule to maximize savings.

---

🧾 What This Means for Employers

• Plan Updates: Employers should review and update their FSA plan documents to reflect the new limits.
• Employee Communication: Clearly communicate the changes to employees during open enrollment to ensure they can take full advantage of the increased limits.
• Payroll Adjustments: Update payroll systems to accommodate the new contribution limits.

---

🧠 Why FSAs Matter

FSAs are a valuable tool for employees to manage out-of-pocket medical and dependent care expenses with pre-tax dollars. By understanding and utilizing the updated limits, both employers and employees can maximize their benefits and savings.

📞 Need Assistance?
We’re here to help you navigate these 2026 FSA changes! Whether you’re an individual looking to maximize your benefits or an employer aiming to update your plans and support your team, contact our team today for personalized guidance and support tailored to your needs.

Sources

• IRS Rev. Proc. 2025-19 Read More
• SHRM (Society for Human Resource Management), IRS Announces 2026 FSA Limits, 2025 Read More
• Employee Benefit Research Institute (EBRI), Flexible Spending Account Limits and Updates Read More
• HealthCare.gov, Health Flexible Spending Account (FSA) Basics Read More

This article is intended to provide general information on disability insurance trends and employee benefits and should not be construed as legal, tax, or insurance advice. The information shared here is not a substitute for personalized consultation regarding your organization’s specific needs. For guidance tailored to your situation, please consult a licensed attorney, tax advisor, or benefits professional. © 2025 Apex Benefit Group. All rights reserved.