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On October 22, 2024, the IRS announced a new limit for 2025 on pre-tax contributions to health flexible spending accounts (FSAs). FSAs, raising it to $3,300, up $100 from 2024's limit.
The Affordable Care Act (ACA), sets a cap on employee salary reduction contributions to health FSAs, starting at $2,500 from 2013, adjusted for inflation. Employers should ensure their health FSA contributions don't exceed $3,300 in 2025. Employers can set lower limits on employees’ pre-tax contributions to a health FSA.
Pre-tax Contributions
The ACA's dollar limit applies only to employees' pre-tax contributions to a health FSA. Employer contributions, like matching or flex credits, don't count unless employees can receive them as cash or taxable benefits, in which case they're treated as salary reductions and counted toward the limit.
Per-employee Limit
Each employee can elect up to $3,300 in salary reductions for their health FSA in 2025, regardless of family use. Family members with their own health FSAs have separate limits. For example, a married couple can each reduce salaries by up to $3,300, subject to lower employer limits.
Health FSAs Carryovers
Employers with health FSAs can allow employees to carry over unused funds to the next plan year, within an annually adjusted limit. For 2025, this limit is $660, up from $640 in 2024. Employers can set lower limits if they choose.
Takeaway
Employers should confirm that their health FSA contribution limit is included in their plan’s documents and communicated to employees at the time of enrollment. Download the bulletin for more details.
National Insurance Services is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Readers are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the readers’ business activities.
