As we approach 2026, the IRS has released a wide range of inflation-adjusted limits affecting retirement plans, health benefits, and flexible spending arrangements. These updates matter to both employees, who are deciding how much to save and contribute, and employers, who must ensure their benefit plans, payroll systems, and communications remain compliant.
Below is a detailed overview of the key 2026 limits, what has changed from 2025, and what these updates mean in practice.
The IRS has released new contribution limits for health flexible spending accounts (a.k.a. health flexible spending arrangements). These limits are subject to annual adjustments by the IRS to reflect inflation.
For the 2026 plan year, members of employer-sponsored plans may contribute up to $3,400 on a pre-tax basis, up $100 from 2025. Keep in mind that employers may impose a lower limit to their employees than the federal maximum.
The maximum carryover amount, which refers to the maximum carryover of unused FSA funds, increases to $680, up from $660. This means employees can carry up to $680 in unused funds from one year to the next. Again, employers may impose a lower carryover limit than the federal maximum.
Each employee has their own $3,400 limit, regardless of family size. Spouses with separate FSAs may each contribute up to their employer-allowed maximum.
Health savings accounts (HSAs), medical savings accounts (MSAs), and high deductible health plans (HDHPs) also have increases set for 2026.
These limits apply for the 2026 tax year and take effect January 1, 2026.
To remain HSA-eligible, HDHPs must meet updated minimum deductible and maximum out-of-pocket thresholds.
These minimum deductible and out-of-pocket limits are indexed for inflation. In the past, these limits have been adjusted annually to reflect changes in the cost of living.
These limits apply to plan years beginning on or after January 1, 2026.
Retirement savings limits continue to rise in 2026, giving taxpayers more opportunities to save tax-advantaged dollars while increasing plan administration considerations for employers.
In 2026, the elective deferral limit for 401(k), 403(b), and most 457 plans will increase to $24,500, up $1,000 from 2025. This is the maximum amount an employee can defer from their salary on a pre-tax or Roth basis.
Catch-up contributions for employees age 50 and older increase to $8,000, up $500 from 2025. Under SECURE 2.0, participants ages 60–63 can continue to take advantage of a higher catch-up limit of $11,250, which remains unchanged from 2025.
The total annual contribution limit for defined contribution plans (such as 401(k) plans, profit-sharing plans, and money purchase plans) increases to $72,000, up from $70,000.
This limit includes:
The maximum annual benefit payable from a defined benefit pension plan increases to $290,000, a substantial $10,000 increase from 2025.
This change primarily affects employers sponsoring traditional pension plans and high-income employees accruing benefits under those plans.
Several important compensation-based thresholds also apply in 2026:
These limits are used for nondiscrimination testing, contribution calculations, and determining plan eligibility.
For 2026, the IRA contribution limit increases to $7,500, up $500 from 2025. This applies to both traditional and Roth IRAs (subject to income limits).
The IRA catch-up contribution for individuals age 50 and older increases to $1,100, reflecting a cost-of-living adjustment now built into law under SECURE 2.0.
The employee contribution limit for SIMPLE plans increases to $17,000, up $500.
Catch-up contributions for SIMPLE plans increase to $4,000, and participants ages 60–63 may contribute up to $5,250, unchanged from 2025.
Additionally, certain applicable SIMPLE plans allow higher contribution limits. For 2026, eligible participants may contribute up to $18,100 under these enhanced rules.
One of the most notable changes for 2026 comes from the One Big Beautiful Bill Act (OBBB Act), which significantly increases dependent care flexible spending account (FSA) limits.
Effective for 2026, the contribution limit for dependent care flexible spending accounts will increase from $5,000 to $7,500 for single filers and married couples filing jointly, or $3,750 for married individuals filing separately.
Dependent care FSA reimbursements remain tax-free if expenses:
Eligible expenses typically include child care, babysitting, and day camp costs.
Adoption assistance limits are also increasing in 2026, with the maximum amount for adoption assistance rising from $17,280 to $17,670 in 2026. This is the maximum credit allowed for qualified adoption expenses, providing greater financial support for adoptive families. The adoption credit is subject to a phase-out based on modified adjusted gross income, and a portion of the credit may be refundable, offering additional financial relief.
For 2026, the monthly limit for qualified transportation fringe benefits, including qualified parking and transit, will increase from $325 to $340. This adjustment allows members of employer-sponsored plans to set aside more pre-tax dollars for parking and transit expenses.
The 2026 benefit and retirement plan updates reflect ongoing inflation adjustments and legislative changes designed to encourage saving and support working families. For employees, these higher limits create new opportunities to save more for retirement, health care, and dependent care on a tax-advantaged basis. For employers, they bring important compliance obligations and a chance to enhance the value of employee benefit offerings and resources.
As always, employers should work closely with plan administrators, payroll providers, and advisors to ensure accurate implementation. For more information, please contact your Stratus HR expert. Not a current Stratus HR client? Book a free consultation and our team will contact you shortly.
The above information is for informational purposes only and should not be construed as legal, tax, or investment advice. Please consult qualified legal counsel or tax professionals for advice specific to your individual circumstances.
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