Many employee benefits are subject to annual dollar limits that are periodically updated for inflation by the IRS. The following commonly offered employee benefits are subject to these limits:
- High deductible health plans (HDHPs) and health savings accounts (HSAs);
- Health flexible spending accounts (FSAs);
- 401(k) plans; and
- Transportation fringe benefit plans.
The IRS typically announces the dollar limits that will apply for the next calendar year well in advance of the beginning of that year. This gives employers time to update their plan designs and make sure their plan administration will be consistent with the new limits.
This Compliance Overview includes a chart of the inflation-adjusted limits for 2021. Although some of the limits will increase, most of the limits remain the same for 2021.
- Tax exclusion for dependent care FSA benefits
- Catch-up contributions to an HSA
- HDHP minimum deductible
- Health FSA limit for employee pre-tax contributions
- Health FSA carryover limit
- Monthly limits for transportation fringe benefit plans
- Employees’ elective deferrals to 401(k) plans, pre-tax and Roth
- Catch-up contributions to a 401(k) plan