For plan years beginning in 2027, the IRS increased the health flexible spending account (FSA) pre-tax contribution limit to $3,500 and the carryover limit to $700, up from $3,400 and $680 in 2026. Employers should ensure their plan limits comply and communicate applicable limits during enrollment.
Contribution Limits
The Affordable Care Act caps employees’ pre-tax health FSA contributions at an inflation-adjusted annual limit. Employers may set a lower limit but cannot exceed the federal maximum.
The health FSA limit applies to employees’ pre-tax contributions. Employer contributions generally don’t count unless employees can choose to receive them as cash or taxable benefits.
For 2027, the $3,500 health FSA pre-tax contribution limit applies per employee, regardless of how many family members use the funds. Eligible family members with their own health FSAs, including spouses, have a separate limit, subject to lower employer limits.
Carryover Limit
Health FSAs generally follow a “use-or-lose” rule: unused funds are forfeited after the plan year and any applicable grace period. Instead of a grace period, employers may allow a carryover of up to $700 for 2027 plan years, up from $680 in 2026. Carried-over funds can cover eligible medical expenses throughout the following plan year without reducing employees’ annual contribution limit. Download the bulletin for more details.
