Two figures do most of the work in a plan year, and they are not the same figure. The health FSA salary reduction maximum caps what an employee may elect out of their own pay. The dependent care limit is a separate cap on a separate arrangement. This page states both as IRS Publication 15-B states them for plan years beginning in 2026, says what each one decides for an employer rather than for an employee, and explains why the number you budget against is almost never the cap itself.
The health FSA salary reduction maximum
IRS Publication 15-B puts it plainly for plan years beginning in 2026: a cafeteria plan may not allow an employee to request salary reduction contributions for a health FSA in excess of $3,400. That is a ceiling on the employee's own election, not a target and not an employer contribution. For budgeting purposes it matters mostly as the upper bound on the payroll mechanics you have to support, because very few populations elect anywhere near it.
The dependent care limit is a different arrangement
Publication 15-B records that for the 2026 tax year the annual dependent care FSA limit was raised from $5,000 to $7,500, with $2,500 to $3,750 for married filing separately. It is worth saying out loud that this is a separate arrangement with its own rules and its own limit: an employer that offers both is running two things, and an employee who elects the maximum in both has elected against two caps rather than one.
What an employer actually budgets against
Not the cap. The employer's cost in a health FSA is the administration fee per participant plus whatever the employer chooses to contribute, and the participation rate is usually well under headcount. So the budget line is participation times fee, plus any employer contribution, and the cap only tells you the widest the payroll deduction can be. Working it from your own participation rather than from your headcount is the difference between a budget and a guess.
Why the limits move, and what to do about it
These are cost-of-living adjusted figures, which means they change on the IRS's schedule and not on yours. The practical consequence for a plan is that any document, communication or payroll configuration that hard-codes a number acquires an expiry date nobody diarised. Reference the plan year's published limit rather than the figure, and keep the plan year the reference was read for on the record beside it.
Questions people ask about fsa limits 2026
What is the health FSA salary reduction limit for plan years beginning in 2026?
IRS Publication 15-B states that for plan years beginning in 2026 a cafeteria plan may not allow an employee to request salary reduction contributions for a health FSA in excess of $3,400. The page linked below is the one that figure was read from.
Is the dependent care limit the same number?
No. Publication 15-B records the annual dependent care FSA limit rising from $5,000 to $7,500 for the 2026 tax year, with $2,500 to $3,750 for married filing separately. It is a separate arrangement with a separate cap.
Does the employer have to contribute up to the limit?
No. The limit caps the employee's own salary reduction election. Whether the employer contributes anything is a plan design decision, and most of the employer's cost in a health FSA is the administration fee per participant rather than a contribution.
How should we hold this in the plan?
Reference the published limit for the plan year rather than writing the number into documents and payroll settings, and record which plan year the reference was read for. The figures are cost-of-living adjusted, so a hard-coded number has an expiry date.