Seyfarth Synopsis: Recently HHS issued a memorandum announcing the maximum annual limitation on cost sharing (a/k/a out-of-pocket maximum) for 2026 and the IRS issued Rev. Proc. 2024-40 announcing the cost-of-living adjustments to certain welfare and fringe benefit plan limits for 2025.
2026 Out-of-Pocket Maximum
On October 8, 2024, the Department of Health and Human Services (HHS) released a memo announcing the 2026 cost-sharing limits applicable to health and welfare plans. The Affordable Care Act requires group health plans to have an out-of-pocket maximum which limits overall out-of-pocket costs or cost sharing on essential health benefits (EHBs) covered by a plan. The cost-sharing limit applies to deductibles, coinsurance, copayments, and any other expenditure required of an individual which is a qualified medical expense with respect to EHBs covered under the plan. Plans are not required to apply the out-of-pocket maximum on benefits that are non-EHBs.
The 2026 out-of-pocket maximums are $10,150 for self-only coverage and $20,300 for other than self-only coverage (e.g., family coverage, self plus one, etc.). This represents an approximate 10.3 percent increase from the 2025 limits which were $9,200 and $18,400, respectively. Note that the cost-sharing limits for high deductible health plans, which tend to be lower, will be announced at a later date.
2025 Limits for Certain Health and Fringe Benefits
Hopefully in time for open enrollment, the IRS has announced 2025 cost-of-living adjustments to various tax related limits, including the dollar limits for contributions to health flexible spending accounts (Health FSAs) and qualified transportation fringe benefit programs. The 2025 cost-of-living adjustments (and the changes from 2024) for these plans are summarized in the table below:
| Health and Welfare and Related Plan Limits | 2024 | 2025 | Change |
| Qualified Transportation Fringe Benefit Monthly Limit (commuter highway vehicle, transit pass and qualified parking) | $315 | $325 | +$10 |
| Health Flexible Spending Account (Health FSA) Maximum Annual Pre-Tax Contribution | $3,200 | $3,300 | +$100 |
| Health FSA Maximum Carryover | $640 | $660 | +$20 |
| Dependent Care Flexible Spending Account (Dependent Care FSA) * Maximum Annual Pre-Tax Contribution – Employee is married and filing a joint return or Employee is a single parent – Employee is married but filing separately | $5,000 $2,500 | $5,000 $2,500 | No change |
Please contact the employee benefits attorney at Seyfarth Shaw LLP with whom you usually work if you have any questions regarding these or other limits on health and welfare and related plans.