The IRS has released its annual inflation adjustments for 2026, impacting key employee benefits such as Health Flexible Spending Accounts (FSAs) and Qualified Transportation Fringe Benefits. These updates, outlined in Revenue Procedure 2025-32, reflect increases designed to keep pace with inflation.

Health FSA Updates

For plan years beginning in 2026:

• Employee Contribution Limit: Increased to $3,400, up from $3,300 in 2025.
• Carryover Limit: Raised to $680 from $660, this limit lets employees roll over unused FSA funds if their plan allows it.

These limits apply to pre-tax salary reductions under the Affordable Care Act. Employers may set lower limits but cannot exceed the IRS maximum.

Qualified Transportation Fringe Benefits

Employees can now receive up to:

• $340/month for commuter transit or vanpooling expenses.
• $340/month for qualified parking expenses.

Both figures are up from $325/month in 2025, offering more flexibility for commuting costs.

Partnering with Pierce Group Benefits

If you have any questions about the 2026 limits for Health FSAs and Transportation Benefits, please contact your PGB Account Executive or email a PGB Representative at partnership@piercegroupbenefits.com.