Many employee benefits have annual dollar limits that the IRS adjusts for inflation each year. The IRS typically announces these limits for the next calendar year before it begins, giving employers time to update their plans and ensure compliance.
The following employee benefits are subject to these limits:
- High Deductible Health Plans (HDHPs) and Health Savings Accounts (HSAs)
- Health Flexible Spending Accounts (FSAs)
- Transportation Fringe Benefit Plans
To help your organization stay compliant, we've outlined the updated limits for 2025. Employers should review these changes and update their plans accordingly.
Health Savings Account (HSA) Contribution Limit
An HSA allows participants to save and pay for qualified medical expenses with tax-free dollars. However, there are limits to contributions, and exceeding these limits can result in tax penalties. Contribution limits vary based on whether participants have self-only or family coverage and if they are 55 years of age or older.
2025 HSA Contribution Limits
Individual & Self-Only Coverage: $4,300
Family Coverage: $8,550
High Deductible Health Plan (HDHP) Annual Deductible
The annual deductible for an HDHP is the amount participants must pay out of pocket for medical expenses before insurance begins to cover costs.
2025 HDHP Annual Deductibles
Individual & Self-Only Coverage: $1,650
Family Coverage: $3,300
High Deductible Health Plan (HDHP) Out-of-Pocket Maximum
The out-of-pocket maximum for an HDHP is the maximum amount participants will have to pay out of pocket for covered medical expenses in a year.
2025 HDHP Out-of-Pocket Maximums
Individual & Self-Only Coverage: $8,300
Family Coverage: $16,600
Health Flexible Spending Account (FSA)
A health FSA is a tax-advantaged account that allows participants to allocate pre-tax funds to cover certain health care expenses. Health FSAs typically cover a variety of out-of-pocket medical expenses, including:
- Insurance copayments and deductibles
- Qualified prescription drugs
- Medical devices
- Dental cleanings
- And more
2025 Health FSA Limits
Limit on Employees' Pre-Tax Contributions: $3,300
Carryover Limit: $660
Dependent Care Flexible Spending Account (FSA)
Similar to a health FSA, a dependent care FSA is a tax-advantaged account that allows participants to allocate pre-tax funds to cover eligible dependent care expenses, such as:
- Childcare facility fees
- Before- or after-school care
- Preschool
- And more
The dependent care FSA tax exclusion for 2025 is $5,000; $2,500 if married and filing taxes separately.
Transportation Fringe Benefits
Transportation fringe benefits cover transportation expenses reimbursed by an employer and are excludable from the employee’s income under a qualified transportation program. The limits for transportation fringe benefits for 2025 are as follows:
2025 Transportation Fringe Benefits
Transit Pass & Vanpooling: $325
Parking: $325
Maintaining compliance in 2025 is easy when you partner with PNW Insurance Solutions. Connect with our team of compliance specialists today!
