Each year, the IRS adjusts employer-provided fringe benefit limits to reflect inflation. These cost-of-living adjustments (COLAs) impact compensation strategies, benefits design, and payroll processes. As 2026 approaches, now is the perfect time to review these updates to ensure accurate budgeting and clear communication with employees. Here are the key changes for 2026:
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs): Maximum reimbursements will rise to $6,450 for self-only coverage and $13,100 for family coverage.
Pension-Linked Emergency Savings Accounts (PLESAs): Under SECURE 2.0, PLESAs help employees save for emergencies without tapping retirement funds. The contribution limit increases to $2,600.
Transportation Fringe Benefits: Monthly exclusions for parking and transit/vanpooling will increase to $340.
Health Flexible Spending Accounts (FSAs): Employee contribution limits rise to $3,400, with a $680 carryover cap for plans allowing rollovers.
Education Loan Repayments: Employer-provided loan repayment exclusions remain permanent under OBBBA, capped at $5,250.
Dependent Care Assistance Program (DCAP): The annual exclusion jumps to $7,500 per return or $3,750 for married filing separately.
Adoption Assistance & Credit: Both increase to $17,670 per child, with phaseouts starting at $265,080 MAGI.
Staying informed on COLAs ensures compliance, minimizes tax risks, and strengthens your benefits strategy. Need help updating your plans? Our team can guide you through IRS rules and optimize your offerings for 2026.
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FAQs
Q: What are the new QSEHRA limits for 2026?
A: For 2026, QSEHRA limits are $6,450 for self-only coverage and $13,100 for family coverage.
Q: How much can employees contribute to Health FSAs in 2026?
A: The Health FSA contribution limit for 2026 is $3,400, with a $680 carryover allowed if the plan permits.
Q: What is the maximum DCAP exclusion for 2026?
A: The DCAP exclusion for 2026 is $7,500 per return or $3,750 for married individuals filing separately.