IRS Updates 2026 FSA, Commuter, and Other Benefit Limits
Selerix Compliance Corner Update!
The IRS has released Revenue Procedure 2025-32, announcing key cost-of-living adjustments for 2026 that affect several employee benefit programs, including flexible spending accounts (FSAs), commuter benefits, adoption credits, and more.
Here’s what employers and HR teams need to know.
Health Flexible Spending Account (FSA) Limits
For plan years beginning in 2026, the health FSA salary reduction contribution limit will increase to $3,400—up $100 from 2025.
For plans with a carryover feature, the maximum carryover amount will be $680 (20% of the 2026 limit). When carrying over unused funds from 2025 to 2026, the applicable limit is $660 (20% of the 2025 limit).
Commuter Benefits
Both qualified parking and mass transit monthly limits will increase to $340 each in 2026—up $15 from 2025.
Adoption Assistance Tax Credit
For 2026, the maximum credit for adoption expenses increases to $17,670 (up $390 from 2025).
The credit begins to phase out for taxpayers with modified adjusted gross income (MAGI) above $265,080 and is completely phased out at $305,080—each threshold increasing by $5,890 from 2025.
Qualified Small Employer HRA (QSEHRA)
For 2026, the reimbursement limits under a QSEHRA increase to:
- $6,450 for single coverage (up $100)
- $13,100 for family coverage (up $300)
HSA and HDHP Limits (Previously Announced)
Earlier this year, Revenue Procedure 2025-19 outlined the new Health Savings Account (HSA) and High Deductible Health Plan (HDHP) limits for 2026.
| 2026 (Single/Family) | 2025 (Single/Family) | |
| Annual HSA Contribution Limit | $4,400 / $8,750 | $4,300 / $8,550 |
| Minimum Annual HDHP Deductible | $1,700 / $3,400 | $1,650 / $3,300 |
| Maximum Out-of-Pocket for HDHP | $8,500 / $17,000 | $8,300 / $16,600 |
ACA Out-of-Pocket Maximums
The Affordable Care Act (ACA) out-of-pocket maximums for in-network essential health benefits will also rise for 2026.
| 2026 (Single/Family) | 2025 (Single/Family) | |
| ACA Maximum Out-of-Pocket | $10,600 / $21,200 | $9,200 / $18,400 |
All non-grandfathered group health plans must include an embedded individual out-of-pocket limit if the family limit exceeds $10,600 (for 2026).
Note: Certain small group “Grandmothered” plans remain eligible for transition relief, which continues until CMS announces a final compliance date.
ACA Reporting Penalties (Forms 1094/1095 Series)
The IRS has also adjusted penalties for ACA reporting. The 2027 penalty amounts apply to returns filed in 2027 for the 2026 calendar year, while the 2026 penalties apply to returns filed in 2026 for 2025.
| Penalty Description | 2027 Penalty | 2026 Penalty |
| Failure to file or furnish a required return | $340 per return | $340 per return |
| Annual limit for non-willful failures | $4,191,500 | $4,098,500 |
| Lower limit for small entities (gross receipts ≤ $5M) | $1,397,000 | $1,366,000 |
| Corrected within 30 days | $60 per return | $60 per return |
| Annual limit when corrected within 30 days | $698,500 | $683,000 |
| Lower limit (≤ $5M gross receipts) when corrected within 30 days | $244,500 | $239,000 |
| Corrected by August 1 | $130 per return | $130 per return |
| Annual limit when corrected by August 1 | $2,095,500 | $2,049,000 |
| Lower limit (≤ $5M gross receipts) when corrected by August 1 | $698,500 | $683,000 |
| Intentional disregard (no cap) | $690 per return | $680 per return |
What Employers Should Do Now
- Review benefit plan documents and employee materials to ensure 2026 limits are reflected accurately.
- Update payroll and HRIS systems for the new FSA, commuter, and reimbursement thresholds.
- Prepare for ACA reporting season by verifying vendor readiness and data accuracy.
These annual IRS updates help employers plan ahead for open enrollment and compliance in 2026. Staying current with changing limits ensures employees can take full advantage of available tax-advantaged benefits—while minimizing potential compliance risks.
Partner with an ACA expert to ensure these updates do not go missed when reporting season comes. Talk to one of our ACA experts to get started.
Disclaimer: Selerix does not provide legal, regulatory or tax guidance, or advice. If legal advice counsel or representation is needed, the services of a legal professional should be sought. The information in this post is intended to provide a general overview of the topics and services contained herein. Selerix makes no representation or warranty as to the accuracy or completeness of the post and undertakes no obligation to update or revise the post based upon new information or future changes.
