Open enrollment season has begun. During this time, employees usually plan for their 2026 employer-offered benefits, which can include choosing whether they can or will participate in flexible spending arrangements (FSAs), health savings accounts (HSAs) and/or contribute to their retirement. The Internal Revenue Service (IRS) recently released its 2026 annual inflation adjustments, so employers may want to communicate these changes to their employees.
Flexible Spending Arrangements (FSAs)
FSAs allow employees to pay for qualified medical expenses not covered by their health plan, including co-pays, deductibles, and a variety of medical products and services ranging from dental and vision care to eyeglasses and hearing aids.
In 2026, eligible employees may annually contribute up to $3,400 to an FSA — also called a flexible spending account — which is an increase of $100 from 2025. For cafeteria plans that permit the carryover of unused amounts, the 2026 maximum carryover amount is $680, an increase of $20 from 2025.
Prior to the plan year’s start, employees must elect their annual contribution amount for their FSA via payroll deduction. As FSAs operate under a use-it-or-lose-it rule, employees should carefully estimate their eligible health care expenses and only contribute funds they are certain they will spend. Any unspent funds remaining after the grace period (if applicable) or the plan year’s end will be forfeited.
Health Savings Accounts (HSAs)
HSAs are pre-tax accounts available to individuals covered under a high-deductible health plan. Eligible individuals can accumulate money — tax-free — in HSAs to pay for qualified medical expenses.
To participate in an HSA, the employee must, among other requirements, be enrolled in an HSA-qualified high-deductible health plan with a minimum annual deductible (not applicable to preventive services).
For 2026, the annual maximum HSA contribution will be:
- $4,400 for individuals with self-only coverage (an increase of $100 from 2025); and
- $8,750 for family coverage (an increase of $200 from 2025).
A high-deductible health plan is defined — for 2026 — as a health plan with an annual minimum deductible of:
- $1,700 for self-only coverage (an increase of $50 from 2025); or
- $3,400 for family coverage (an increase of $100 from 2025).
The maximum annual out-of-pocket expenses (deductibles, co-payments and other amounts — but not premiums) will also increase to:
- $8,500 for self-only coverage (an increase of $200 from 2025); or
- $17,000 for family coverage (an increase of $400 from 2025).
Retirement Plan Contribution Limits
In 2026, individuals can annually contribute up to $24,500 to their 401(k) plans, up from $23,500 in 2025. This annual contribution limit also affects employees who participate in 403(b) and governmental 457 plans as well as the federal government’s Thrift Savings Plan.
For Individual Retirement Arrangements (IRAs), the 2026 annual contribution limit will increase to $7,500 from $7,000.
The 2026 catch-up contribution limit that generally applies for employees aged 50 and over who participate in most workplace retirement plans will be $8,000, so those participants can contribute up to $32,500 for next year.
Under a change made in 2025, a higher catch-up contribution limit now applies for employees aged 60, 61, 62 and 63 who participate in these plans. For 2026, this higher catch-up contribution limit remains $11,250 instead of the $8,000 noted for employees aged 50 and over. Those 60- to 63-year-old employees can contribute a total of $35,750.
Additionally, the income ranges for determining eligibility to make deductible contributions to traditional IRAs, to contribute to Roth IRAs and to claim the Saver’s Credit all increased for 2026.
Katie Culliton, Editor, CalChamber
CalChamber members can read more about Health Saving Accounts and Private Retirement Savings Plans in the HR Library. Not a member? Learn more about what CalChamber can do for your business.
