The latest dollar limits for health and welfare plans and fringe benefits have been revealed for 2025. Retirement plan limits are sure to follow soon. Below is a round-up of the limits that have been announced in various guidance that will apply for 2025.
Health Flexible Spending Accounts
Maximum Salary Reduction Contributions. The maximum amount that can be contributed as an employee salary reduction contribution to a health flexible spending account is $3,300. This is an increase of $100 from 2024.
Carry-Overs. If the health flexible spending account permits carry-overs of unused amounts, the limit on the carry-overs will increase by $20 to $660.
Amendments May Be Needed. While many cafeteria plan documents provide for automatic adjustments to these limits, if a plan document has a dollar amount specified, then an amendment to the cafeteria plan document will be needed prior to the start of the plan year to take advantage of these increases.
Guidance: Rev. Proc. 2024-40.
High Deductible Health Plans
For 2025 dollar amounts applicable to high deductible health plans, see our blog post on this topic at https://klblawgroup.com/health-savings-account-high-deductible-health-plan-and-excepted-benefit-health-reimbursement-account-limits-go-up-for-2025/.
ACA
Affordability Threshold. Under the employer mandate provisions of the Affordable Care Act, in order for coverage to be considered “affordable,” the employee’s required premium contribution for self-only coverage cannot exceed a certain percentage of “household income.” That percentage is 9.02% for 2025. That is an increase of .63% from 2024, meaning that the cost of coverage to employees may go up slightly for 2025 and still be considered affordable.
Guidance: Rev. Proc. 2024-35.
Cost Sharing Limits. CMS announced the cost-sharing limits for 2026 benefit year. The limit for self-only coverage is $10,150 (increased by $950) and for other than self-only coverage the limit is $20,000 (increased by $1,900).
Guidance: October 8, 2024 CMS Guidance
Penalties. Penalties for failures related to ACA information reporting requirements for the 2025 tax year, to be filed in 2026 have been increased as follows:
- Filing a correct information return: $340 per return (increased by $10), subject to certain annual maximums, also adjusted annually. There are lesser penalties for corrective filings within certain timeframes and higher penalties for intentional failures (no limit).
- Furnishing a correct statement to individuals: $340 per statement (increased by $10), subject to certain annual maximums, also adjusted annually. There are lesser penalties for late furnishing of statements within certain timeframes and higher penalties for intentional failures (no limit).
Guidance: Rev. Proc. 2024-40
Adoption Assistance
Adoption Credit and Adoption Assistance Programs. The limit for both the credit and exclusion from gross income under an employer’s adoption assistance program is $17,280 (an increase of $470 from 2024). These credits/benefits begin to phase out at a modified adjusted gross income of $259,190 (increased by $7,040) and completely phased out at $299,190 or more (increased by $7,040).
Guidance: Rev. Proc. 2024-40.
Qualified Transportation Fringe Benefits
Transit Passes and Transportation in a Commuter Highway Vehicle and Qualified Parking. The monthly limit in 2025 is $325 (increased by $10)
Guidance: Rev. Proc. 2024-40
HRAs
Qualified Small Employer Health Reimbursement Amounts. Total payment and reimbursement benefits for the year are $6,350 (increased by $200), or for family coverage, $12,800 (increased by $350)
Guidance: Rev. Proc. 2024-40
Excepted Benefit HRAs. Maximum amount made available for the 2025 plan year is $2,150 (increased by $50).
Guidance: Rev. Proc. 2024-25
Archer Medical Savings Accounts
HDHP Deductible Minimum and Maximum: $2,850 minimum (increased by $50) and $4,300 maximum (increased by $150) for self-only coverage; $5,700 minimum (increased by $200) and $8,550 maximum (increased by $200) for family coverage.
Out of Pocket Limit: $5,700 (increased by $150) for self-only coverage; $10,500 (increased by $300) for family coverage.
Guidance: Rev. Proc. 2024-40
Action Items
Plan sponsors should be aware of these changes and take appropriate action such as amendments, updating plan limits and participant communications.