The IRS has announced updated contribution limits for several employee benefit accounts for 2027. These annual adjustments reflect inflation and can affect how much employees can set aside for healthcare, transportation and other qualified expenses.

For employers preparing their benefits packages and employees making open enrollment decisions, understanding these changes is an important part of planning for the year ahead. Here is a breakdown of the 2027 limits and what they mean for your benefits.

2027 Healthcare FSA Contribution Limits

A healthcare flexible spending account (FSA) allows employees to set aside pre-tax dollars to pay for eligible medical expenses, including copayments, prescriptions, dental care and vision expenses. For 2027, the IRS has increased the annual employee contribution limit by $100.

Year	Annual Contribution Limit
2026	$3,400
2027	$3,500

 

This limit applies to healthcare FSAs, including limited-purpose and combination FSAs. For employees who regularly have out-of-pocket healthcare expenses, the increased limit provides an opportunity to set aside additional pre-tax dollars.

2027 Healthcare FSA Carryover Limit

Some employers offer a carryover provision that allows employees to retain a portion of their unused healthcare FSA funds for the following plan year. The maximum permitted carryover amount has also increased for 2027.

Year	Maximum Carryover
2026	$680
2027	$700

 

Employers are not required to offer a carryover. Some plans instead provide a grace period, while others follow the standard use-it-or-lose-it rule. Employees should review their plan documents to understand which provisions apply and when funds must be used.

2027 Commuter Benefit Contribution Limits

Commuter benefits help employees save on eligible work-related transportation expenses through tax-advantaged payroll deductions. For 2027, the monthly limit for qualified transit and parking benefits will increase by $10.

Year	Monthly Limit
2026	$340
2027	$350

 

The $350 monthly limit applies separately to qualified transit expenses and qualified parking expenses. Eligible expenses may include public transportation passes, qualifying vanpool transportation and parking at or near an employee’s workplace. These benefits can help employees reduce taxable income while managing regular commuting costs.

2027 Adoption Assistance Limits

Employers that offer qualified adoption assistance programs should also be aware of updated IRS limits. For 2027, the maximum amount of qualifying adoption assistance that may be excluded from an employee’s gross income increases to $18,250.

Year	Annual Exclusion Limit
2026	$17,670
2027	$18,250

 

Income-based phaseouts may affect eligibility for the full exclusion or adoption tax credit. For 2027, the phaseout begins at a modified adjusted gross income of $273,680 and is complete at $313,680. Employers offering adoption assistance should review their plan provisions and communicate applicable limits to participating employees.

2027 QSEHRA Contribution Limits

A qualified small employer health reimbursement arrangement (QSEHRA) allows eligible small employers to reimburse employees for qualified medical expenses, including certain health insurance premiums. The IRS has increased the maximum annual reimbursement amounts for 2027.

Coverage Type	2026 Limit	2027 Limit
Self-only	$6,450	$6,700
Family	$13,100	$13,550

 

These limits represent the maximum permitted reimbursements under a QSEHRA. Employers may establish lower reimbursement amounts within applicable requirements.

Previously Announced: 2027 HSA Contribution Limits

The IRS previously announced updated health savings account (HSA) contribution limits for 2027. HSAs allow eligible individuals enrolled in qualifying health plans to save for current and future healthcare expenses while receiving valuable tax advantages.

Coverage Type	2026 Limit	2027 Limit
Self-only	$4,400	$4,500
Family	$8,750	$9,000

 

Individuals age 55 and older who are eligible to contribute to an HSA may also make an additional $1,000 catch-up contribution. HSA contribution limits include both employee and employer contributions. Unlike FSAs, unused HSA funds roll over from year to year and remain with the account holder even after changing employers or retiring.

2027 High-Deductible Health Plan Requirements

To qualify for HSA contributions, individuals generally must be covered by an HSA-eligible health plan and meet other IRS requirements. The IRS has also updated the minimum deductible and maximum out-of-pocket amounts for qualifying high-deductible health plans (HDHPs).

HDHP Requirement	2026	2027
Self-only minimum deductible	$1,700	$1,750
Family minimum deductible	$3,400	$3,500
Self-only maximum out-of-pocket	$8,500	$8,700
Family maximum out-of-pocket	$17,000	$17,400

 

Employers should review their health plan offerings to confirm whether they meet the updated requirements for HSA eligibility.

What These Changes Mean for Employers and Employees

Annual IRS limit adjustments provide an opportunity for employers and employees to review their benefit strategies. For employers, this may include updating plan documents, reviewing payroll deduction settings and communicating new contribution limits during open enrollment.

Employees should consider their anticipated healthcare and commuting expenses when deciding how much to contribute to their accounts. A few important steps include:

• Review the updated 2027 contribution limits.
• Estimate expected healthcare and commuting expenses.
• Confirm whether your employer offers an FSA carryover or grace period.
• Understand HSA eligibility requirements before contributing.
• Review benefit elections and payroll deductions for the upcoming plan year.

Taking time to understand these changes can help employees make informed decisions and take full advantage of their available benefits.

Plan Ahead With Advantage Administrators

At Advantage Administrators, we understand how important it is for employers and employees to stay informed about changes to benefit account regulations. As 2027 approaches, reviewing contribution limits and plan provisions can help employers prepare for a smooth transition while giving employees the information they need to make confident benefit decisions.

Whether you are evaluating your healthcare FSA, reviewing HSA contribution options or planning for commuter benefits, understanding the latest IRS guidelines is an important part of maximizing your benefits.

This article is intended for educational purposes only and does not constitute legal, tax or financial advice. IRS limits and eligibility requirements are subject to applicable regulations and plan provisions. Consult your plan documents or a qualified professional for guidance specific to your circumstances.