IRS Announces 2025 Benefit Plan Contribution Limits

On Oct. 22, 2024, the Internal Revenue Service (IRS) announced via Revenue Procedure 2024-40 the dollar limitation for 2025 on employee salary reductions for contributions to health flexible spending accounts; the monthly limitation regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass; and the maximum amount that can be excluded from an employee’s gross income for the amounts paid for qualified adoption expenses furnished pursuant to an adoption assistance program.

The details:

Flexible Spending Accounts

The 2025 maximum employee salary reduction contribution to a health flexible spending account will be $3,300. The limit was $3,200 in 2024.  The Affordable Care Act (ACA) had limited employee salary reductions for contributions to health flexible spending accounts to $2,500 per employee but allowed that limit to be adjusted annually for inflation in increments of $50.

The $3,300 limit applies to both full-purpose and limited-purpose health flexible spending accounts. However, an employer is not required to adopt the maximum amount allowed in its plan design and may choose to allow an amount less than $3,300. The $3,300 limit applies only to employee salary reduction contributions during the benefit plan year and does not impact employer-paid contributions or, if offered, contributions made as a result of the balance carryover option. If an employer provides flex credits that employees may elect to receive either as cash or as a taxable benefit, those flex credits are treated as employee salary reduction contributions and count toward the $3,300 limit.

If a cafeteria plan permits the carryover of unused amounts, the maximum carryover amount is $660 for 2025 as compared to $640 in 2024.

The dependent care spending account maximum is set by statute and is not subject to inflation-related adjustments. Consequently, the 2025 dependent care spending account maximum continues to be limited to the smallest of the following amounts:

• $5,000 if the employee is married and filing a joint return or if the employee is a single parent ($2,500 if the employee is married but filing separately);
• The employee's “earned income” for the year; or
• The spouse’s “earned income,” if the employee is married at the end of the taxable year.

Qualified Transportation/Parking Benefits

Transportation

The monthly limitation regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass will increase to $325 in 2025 from $315 in 2024. 

Parking

The monthly limitation regarding the fringe benefit exclusion amount for qualified parking will increase to $325 in 2025 from $315 in 2024. 

Adoption Assistance Programs

The maximum amount that can be excluded from an employee’s gross income for the amounts paid or expenses incurred by an employer for qualified adoption expenses furnished pursuant to an adoption assistance program for adoptions by the employee in 2025 is $17,280. This is an increase of $470 over the 2024 maximum of $16,8.10.

Summary of Changes to Contribution Limits

Have questions?

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