On October 9, 2025, the IRS released Revenue Procedure 2025-32, providing a list of inflationary adjustments made to certain employee health and welfare benefits (and other various items) for the 2026 calendar year, including:

• 2026 inflationary-adjusted health FSA employee contribution and carryover limits

• 2026 inflationary-adjusted qualified transportation fringe benefit reimbursement program limits

The new limits for these benefits are as follows:

Health FSA (for both general purpose and limited purpose health FSAs)

• An employee may contribute a maximum of $3,400 to a health FSA for plan years beginning on or after January 1, 2026 (up from $3,300 in 2025)

• An employee may carry over a maximum amount of $680 from a plan that has a plan year beginning on or after January 1, 2026, to the following plan year (up from $660 in 2025)

Commuter Transit/Qualified Parking Benefit Limits

• For 2026, an employee may receive up to $340 per month in reimbursements for qualified transportation expenses (e.g., commuter highway vehicle, transit passes) (up from $325 in 2025)

• For 2026, an employee may receive up to $340 per month in reimbursements for qualified parking expenses (up from $325 in 2025)

The maximum amount of dependent care FSA (DCAP) benefits that may be received on a tax-free basis during a calendar year was adjusted with the passage of the One Big Beautiful Bill Act in July 2025 and is now $7,500 for most employees in 2026 (up from $5,000 in 2025).

As a reminder, these annual adjustments are permissive, meaning employers/plan sponsors are not required to adopt the above plan limit adjustments within their plan. If an employer/plan sponsor chooses to adjust their employee contribution/reimbursement amounts, they should reflect such changes within their accompanying document(s) that describe the plan(s).

Regulatory and Legislative Strategy Group