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Employee benefit plans are a vital aspect of compensation packages and can be a great way to boost company morale, but they also come with their own set of tax implications. Many benefits are subject to annual dollar limits that are adjusted by the IRS each year to account for inflation. Understanding these limits—and how they intersect with employee benefit plan tax considerations—is crucial for both employers and employees.

In 2025, several commonly offered employee benefits, such as High Deductible Health Plans (HDHPs), Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), and 401(k) plans, will be subject to these updated limits. Employers must stay informed about these changes to ensure their benefit offerings are compliant with IRS regulations and to avoid any potential employee benefit plan tax issues.

The IRS typically announces the dollar limits that will apply for the next calendar year well before the beginning of that year. This gives employers time to update their plan designs and make sure their plan administration is consistent with the new limits. For everyday individuals, these increases offer greater opportunities to save on taxes with pre-tax benefits and manage expenses, particularly in healthcare and retirement planning.

Increased benefit plan limits

With inflation rates running high, several employee benefit plan limits will see significant increases in 2025. These changes are designed to help employees better manage their healthcare and retirement savings.

The following limits are set to increase in 2025:

• HSA contributions
• HDHP limits for minimum deductibles and out-of-pocket maximums
• Health FSA pre-tax contribution limit
• Health FSA carryover limit
• Monthly limits for transportation fringe benefit plans
• Employees’ elective deferrals to 401(k) plans, pre-tax and Roth
• Tax exclusion for adoption assistance benefits

Unchanged benefit plan limits

Some benefit plan limits do NOT increase year to year because they are not adjusted for inflation. These include:

• Tax exclusion for dependent care FSA benefits
• Catch-up contributions to an HSA

Employee benefit plan limits for 2025

As we approach 2025, employers and employees alike need to stay informed about the annual dollar limits that affect various employee benefit plans. Understanding these limits is crucial for effective financial planning and compliance with IRS regulations.

HSA contribution limits for 2025

Health savings accounts offer a tax-advantaged way to save for healthcare expenses, and the IRS has increased the limits for 2025. For self-only coverage, the contribution limit is $4,300, up from $4,150 in 2024. For family coverage, the limit is $8,550, an increase from $8,300. These adjustments reflect the ongoing rise in healthcare costs and offer employees more opportunities to save.

Self-only

• 2024: $4,150
• 2025: $4,300
• Change: +$150

Family

• 2024: $8,300
• 2025: $8,550
• Change: +$250

Catch-up contributions (age 55 and older)

• 2024: $1,000
• 2025: $1,000
• Change: None

HDHP limits for 2025

High-deductible health plans remain a popular choice for those seeking lower premiums in exchange for higher deductibles. They are often paired with HSAs, allowing enrollees to save pre-tax dollars for medical expenses.

Minimum HDHP deductibles

In 2025, the minimum deductible for self-only coverage will increase to $1,650, while the family coverage deductible will rise to $3,300.

Self-only

• 2024: $1,600
• 2025: $1,650
• Change: +$50

Family

• 2024: $3,200
• 2025: $3,300
• Change: +$100

Out-of-pocket HDHP maximums

The out-of-pocket maximums are also seeing an uptick, with self-only coverage capped at $8,300 and family coverage at $16,600. These HDHP expense limits include deductibles, copayments, and other amounts—but not premiums.

Self-only

• 2024: $8,050
• 2025: $8,300
• Change: +$250

Family

• 2024: $16,100
• 2025: $16,600
• Change: +$500

FSA limits for 2025

Health FSAs allow employees to set aside pre-tax dollars for qualifying medical expenses. Dependent care FSAs are another valuable tool for managing the costs of childcare and dependent care services. Employers should remind employees to maximize their contributions within these limits.

Can you use 2025 FSA for 2024 expenses?

No, you are not allowed to use FSA funds from one year on expenses incurred in a previous year. However, the increased carryover limit may offer some relief if you’re concerned about unused funds.

Health FSAs

The 2025 FSA dependent care limits and the health FSA limits are crucial for financial planning. The contribution limit for health FSAs will increase to $3,300, and the carryover limit will increase to $660, giving employees more flexibility in managing their healthcare spending.

2025 Flex spending limits on employees' pre-tax contributions

This allows you to allocate pre-tax money, reducing your taxable income and saving you money. You'll receive these funds back when you submit claims for eligible health care and daycare expenses.

• 2024: $3,200
• 2025: $3,300
• Change: +100

Carryover limit

Note: Carryover amounts are tied to the plan year dates, so the allowed carryover for a 2024 plan year (to be used in 2025) is $640. The allowed carryover for a 2023 plan year (to be used in 2024) is $610.

• 2024: $610
• 2025: $660
• Change: +$50

Dependent care FSAs

The dependent care FSA contribution limits for 2025 remain unchanged at $5,000 per household (or $2,500 for married couples filing separately). While the lack of an increase might seem disappointing, these funds still provide a significant tax advantage for dependent care expenses.

• 2024: $5,000 ($2,500 if married and filing taxes separately)
• 2025: $5,000 ($2,500 if married and filing taxes separately)
• Change: None

Transportation fringe benefit limits for 2025

Commuting to work can be costly, but transportation fringe benefits help ease the burden. In 2025, the monthly limit for transit passes or commuter highway vehicles will increase to $325, up from $315 in 2024. The same increase applies to qualified parking benefits. These changes provide a modest boost to help employees offset commuting costs.

Transit passes or commuter highway vehicles

• 2024: $315
• 2025: $325
• Change: +$10

Qualified parking

• 2024: $315
• 2025: $325
• Change: +$10

401(k) limits for 2025

401(k) plans remain a cornerstone of retirement savings for many employees. They allow employees to contribute a portion of their pre-tax income—with many employers also offering matching contributions—and are tax-deferred until they are withdrawn, typically during retirement.

2025 Contribution limits

The IRS has increased the contribution limits for 2025, with the maximum elective deferral now $23,500. However, the 401K catch-up contribution limit (available to employees aged 50-59 and 64+) remains at $7.500. The big change is a new catch-up limit for those aged 60-63. Employees in that age group can contribute a catch-up contribution of $11,250.

Employee elective deferrals

• 2024: $23,000
• 2025: $23,500
• Change: +$500

Catch-up contributions (for those aged 50-59, 64+)

• 2024: $7,500
• 2025: $7,500
• Change: None

Catch-up contributions (for those aged 60-63)

• 2024: $7,500
• 2025: $11,250
• Change: +3,750

2025 Annual compensation limit

The annual compensation limit impacts contributions to certain types of retirement plans, including 401(k)s. This limit, set by the IRS, is crucial for highly compensated employees looking to maximize their retirement savings.

• 2024: $345,000
• 2025: $350,000
• Change: +$5,000

Stay up-to-date with Christensen Group

Staying informed about the latest employee benefit plan limits is essential for both employers and employees. With the 2025 limits now available, it’s time to review your benefits and make any necessary adjustments to your financial planning strategies. Whether it’s maximizing HSA contributions, adjusting 401(k) deferrals, or planning dependent care expenses, these limits play a crucial role in helping you achieve your financial goals.

For more information or assistance in navigating these changes, contact the employee benefits team at Christensen Group Insurance. We’re here to help you make the most of your employee benefits in 2025 and beyond. And if you're looking for more unique employee benefits, here are 30 trendy, non-core perks to consider.

Additional links and resources

• IRS Revenue Procedure 2022-24: 2024 limits for HSAs and HDHPs
• IRS Notice 2023-75: 2024 limits for retirement plans‍
• IRS Employer’s Tax Guide to Fringe Benefits: 2024 limits for accident and health benefits, educational assistance, and other fringe benefits