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2025 Contribution Limits – Updates

The IRS has announced the 2025 contribution limits for flexible spending accounts (FSA), commuter benefits, and more. Here’s a look at what’s changing:

  • Health FSA: $3,300 (Increased from $3,200).
  • FSA Rollover: $660 (Increased from $640).
  • Commuter (Parking and Transit): $325 per month (Increased from $315).
  • Dependent Care: The annual limits will remain $5,000 for single taxpayers and married couples filing jointly or $2,500 for married people filing separately.
  • Qualified Small Employer HRA: $6,350 for individuals and $12,800 for families.
  • HSA Limits (Announced Previously): $4,300 for individuals and $8,550 for families.
  • PCORI fee adjustment: 2025 Fee Not Yet Announced

IRS Contribution Limits (2024 Update)

Each year the IRS announces updates to contribution limits for Flexible Spending Accounts (FSA), Health Savings Accounts (HSA), Health Reimbursement Arrangements (HRA), and other tax-advantaged accounts. Here’s a look at what’s changing:

LIMIT CATEGORY 2024 LIMITS 2023 LIMITS
Health FSA: Max Contribution Limit $3,200 $3,050
Health FSA: Rollover Max $640 $610
DCFSA: Max Contribution Limit $2500 / $5000 $2,500 / $5,000
HSA: Max Contribution Limit $4,150 Self-Only
$8,300 Family		 $3,850 Self-Only
$7,750 Family
HSA: Catch-Up Contribution Limit $1000 $1000
HSA: HDHP Out-of-Pocket Max $8,050 Self-Only
$16,100 Family		 $7,500 Self-Only
$15,000 Family
HSA: HDHP Minimum Annual Deductible $1,600 Self-Only
$3,200 Family		 $1,500 Self-Only
$3,000 Family
Commuter Reimbursement: Parking $315 $300/month
Commuter Reimbursement: Transit $315 $300/month

IRS 2019 Changes For Health FSA and Transit plans

The pre-tax contribution maximum for health flexible spending accounts (FSAs) – including limited purpose FSAs – will increase from $2,650 to $2,700 for plan years on or after Jan. 1, 2019. In addition, qualified transportation/transit and parking monthly limits in 2019 will increase from $260 to $265. There is no change in the Dependent Care FSA limits.

The IRS usually announces changes to contribution limits in October before the typical employee open enrollment period. Because this year’s announcement is coming after many open enrollments have closed, employers may choose whether to increase these maximum limits this year or wait until next year.

Unlike the pre-tax health FSA maximum, the limits under a transportation plan will include any employer contribution toward the parking or transit benefits. Any employer contribution reduces the amount an employee can elect as a pre-tax amount for their parking or transit benefits. Should a member who has elected an FSA want to take advantage of these new limits – even if their open enrollment period has closed – they can work with their HR representative to adjust their payroll deductions. However, members will not be able to elect an FSA if their open-enrollment period has closed.

If your client would like to increase the contribution maximum for their employees, please call your representative for additional information.

When can I make an election change to my FSA? To my HSA?

There are many common misconceptions regarding election changes when it comes to pre-tax benefit accounts. In fact, 1 in 3 people understands when an election change can occur for a health savings account. (HINT: It is more often than you might realize.) This is understandable given that flexible spending accounts have been available longer and are likely shaping people’s opinions regarding HSAs. With open enrollment in full swing for many people, it is an important time to break these misconceptions down. Let’s start by looking at the basics of an election change.

The Basic Rules of FSA and HSA Election Changes

Flexible Spending Accounts: An FSA election change can occur at open enrollment each year or when a qualifying event has occurred (if permitted by the employer). The IRS specifies that election changes during the plan year must be consistent with the eligible change in status. All changes must follow IRS guidelines and generally require supporting documentation of the event. The most common qualifying events include:

  • Change in marital status (such as marriage, divorce or death of a spouse)
  • Birth / adoption of a child
  • Change in employment affecting eligibility or coverage
  • Change in residence or change in cost of coverage (restricted to Dependent Care FSA changes)

Health Savings Accounts: An HSA election change can occur at any time, for any reason. An employer may limit changes to once per month for administrative purposes. However, there are no other restrictions on changing your pre-tax HSA elections.

Applying the Basic Rules for an Election Change

With a clear understanding of the basic rules, let’s run through a few scenarios. We’ll start with a few easy ones and move on to some more complicated scenarios.

Scenario #1: It’s open enrollment

Impact to FSA election: Follow your employer’s process to enroll in the FSA. Be sure to enroll prior to the end of the open enrollment period. You will need to actively make an FSA election each plan year. This is your main opportunity to start or stop an election, and increase or decrease an election.

Impact to HSA election: Follow your employer’s process to enroll in the HSA. If you already have an HSA with your employer’s preferred HSA partner, you will not need to enroll each year. Be sure you understand the process your employer is using to fund and set HSA pre-tax contribution amounts. If your employer is using direct deposit to fund the HSA, you may have a rolling election, which is only changed when it is requested. Your employer may however use open enrollment as an opportunity for all HSA eligible employees to update and change their elections. In this case, you may need to actively select an HSA pre-tax contribution amount in order to continue contributing in the new plan year. HSA limits are set by the IRS each year.

Scenario #2: I just got married.

Impact to FSA election: Notify your employer of your change in marital status as soon as possible. There is a limited time period from the event in which you are eligible for a mid-year election change. When getting married, you are eligible to INCREASE your FSA election.

Impact to HSA election: Make changes at any time!

Scenario #3: I had a baby.

Impact to FSA election: Notify your employer of the birth of your child. The birth of a child (or the date of adoption) allows you to INCREASE or START a Medical FSA election and/or a Dependent Care FSA election. Confirm with your employer on any limitations that may apply.

Impact to HSA election: Make changes at any time!

Scenario #4: My spouse changed jobs and I am starting benefits with my employer.

Impact to FSA election: Notify your employer of your qualifying event and follow the steps to enroll in the FSA.

Impact to HSA election: Make changes at any time!

Scenario #5: I moved and will no longer need child care services for my eligible dependent.

Impact to FSA election: Notify your employer of the change of address and change in child care expense. Follow the steps outlined by your employer to stop your active Dependent Care FSA election. However, moving is not generally a qualify event for purposes of a Medical FSA. Therefore, changes would not be permitted to your Medical FSA.

Impact to HSA election: There is no direct impact to an HSA. However, there is also no restriction against changes. If you no longer have a child care expense, that is a great time to consider increasing your HSA election.

Scenario #6: My employer is changing health plans mid-year, but the FSA is on a calendar year.

Impact to FSA election: A change in health plan is not a qualifying event. If you are already enrolled in a Medical FSA, you would continue with your existing election through the end of the FSA plan year.

Impact to HSA election: If you select an HSA-qualifying health plan and are still covered by a Medical FSA, you are not eligible to contribute to an HSA until after the FSA plan year ends. If you are changing health plans and will no longer by covered by an HSA-qualified health plan, you will need to determine your prorated HSA contribution amount for the year and may need to stop contributions.

When in doubt…tips to consider

As you can see, these are just a few scenarios affecting an election change. It can be complicated. Remember these few tips the next time you consider changing your FSA or HSA election.

  • TIP #1: PLAN FOR THE EXPECTED WHEN IT COMES TO FSA ELECTIONS.  Consider what lies ahead in the coming year. When possible, factor situations that are known into your initial FSA election.
  • TIP #2: FSA ELECTION CHANGES NEED TO BE CONSISTENT WITH THE STATUS CHANGE—This is the tricky part. When you have a qualifying event, the election change must also be consistent with the impact of the qualifying event. So, if your family gets bigger, you can increase elections. If your family gets smaller, you may be eligible to decrease an election. Note: Employers may restrict mid-year election changes.
  • TIP #3: AS LONG AS YOU ARE HSA ELIGIBLE, HSA CHANGES CAN BE MADE. Determining when you are eligible to contribute to an HSA can sometimes be complicated. Everything else is pretty simple. HSA election changes can be made at any time, for any reason.
  • TIP #4: When in doubt, seek advice.