FSA Contribution Limits for 2026

Good news for your employees with Flexible Spending Accounts (FSA): the contribution limit has increased.

The Internal Revenue Service (IRS) released the annual cost-of-living adjustments affecting the maximum contribution limits for several pre-tax benefits, including health FSAs, transit/parking accounts, and HSAs. 

FSA Contributions Limits: 2026

The IRS confirmed that for plan years beginning on or after Jan. 1, 2026, the contribution limit for health FSAs will increase another $100 to $3,400. For those plans that allow a rollover of unused funds, the maximum rollover amount will increase to $680 for 2026.

Additionally, the monthly contribution and reimbursement limit for transit and parking FSAs will increase to $340 per account in 2026.

Employees must use FSA funds within a plan year. Remember that health FSAs have a “use-or-lose” rule, meaning that any funds left unused at the end of the year are forfeited to the employer.

Two Exceptions to the FSA Rule

Two exceptions to the use-or-lose rule permitted by the IRS are rollover and grace period. HR teams must communicate company policies to employees well in advance so people can plan accordingly.

1. Rollover: If funds are not used by the end of the year, up to $680 can be rolled over from the 2026 plan year into the next plan year. 
2. Grace Period: An employer can adopt a grace period for their health FSA. As explained by the IRS, “A grace period is a period of up to two months and 15 days immediately following the end of a plan year during which a participant may use amounts remaining from the previous plan year (including amounts remaining in a health FSA) to pay expenses incurred for certain qualified benefits during that two-month and 15-day period.” 

A health FSA may incorporate either of these features; however, a plan may not have a rollover and grace period. 

Plans may also include run-out periods that provide participants additional time to submit claims incurred during the plan year (typically 90 days). This can be in addition to either a rollover or grace period.

How Can CoAd Help?

CoAd provides pre-tax benefits administration of, including HRAs, HSAs, and FSAs. When you choose CoAd's pre-tax benefit plan administration, you receive a dedicated service team, access to our support portal, automated claims processing, and a PrimePay debit card and mobile app.

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