The Internal Revenue Service has released Revenue Procedure 2025-32, announcing key cost-of-living adjustments that will affect Flexible Spending Accounts (FSAs) beginning with plan years on or after January 1, 2026. In addition, recent legislation has increased the annual contribution limits for Dependent Care FSAs (DCAPs) starting in the 2026 plan year.
Health Flexible Spending Account (FSA) Updates
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The annual contribution limit for voluntary employee salary reductions to health FSAs will increase to $3,400 in 2026 (up from $3,300 in 2025).
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If your cafeteria plan allows for carryovers, the maximum carryover amount into the 2027 plan year will increase to $680 (up from $660).
Health Flexible Spending Account Limits by Tax Year |
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| 2026 | 2025 | 2024 | 2023 |
| $3,400 | $3,300 | $3,200 | $3,050 |
Dependent Care FSA (DCAP)
Recent legislation has increased the annual contribution limits for Dependent Care FSAs for plans starting on or after January 1, 2026:
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$7,500 for single filers and married couples filing jointly (up from $5,000)
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$3,750 for married individuals filing separately (up from $2,500)
Note: This limit is not indexed for inflation and is fixed unless changed by legislation.
Next Steps
If you would like to amend your current MedCost Flexible Spending Summary Plan Description (SPD) to reflect these updates, please reach out to your MedCost Account Manager.
We recommend reviewing and updating your employee communications and enrollment materials ahead of your next open enrollment period to ensure compliance and awareness of these changes. For additional guidance on FSAs, please review IRS Publication 969.