Reviewed by a licensed benefits professional. Last reviewed: September 25, 2026.
Cafeteria 125 amounts are the dollar limits the IRS sets on each benefit an employee can pay for pre-tax through a Section 125 cafeteria plan. There is no single overall Section 125 limit. Each benefit inside the plan has its own cap, and one of the biggest, pre-tax health premiums, has no cap at all.
I get this question from owners every fall, usually phrased as "what is the Section 125 max this year?" The honest answer is a table, not one number. Below is that table for 2026, what is already set for 2027, and five years of history for anyone checking an old W-2 or plan document.
Key facts (2026):
- The health FSA salary reduction limit is $3,400, and the carryover limit is $680 (IRS Revenue Procedure 2025-32, October 2025).
- The dependent care FSA limit rose to $7,500 per household, or $3,750 for married filing separately, under the One Big Beautiful Bill Act, the first increase since 1986 (Mercer, 2025).
- The HSA limit is $4,400 for self-only coverage and $8,750 for family coverage (IRS Revenue Procedure 2025-19).
- For 2027, the HSA limit rises to $4,500 and $9,000 (IRS Revenue Procedure 2026-24, May 2026).
- Qualified benefits paid through a cafeteria plan are exempt from federal income tax, Social Security, Medicare and FUTA (IRS Publication 15-B, 2026).
What Are the Cafeteria 125 Amounts for 2026?
The cafeteria 125 amounts for 2026 are $3,400 for a health FSA, $7,500 for a dependent care FSA, and $4,400 or $8,750 for an HSA, per IRS Revenue Procedures 2025-32 and 2025-19. Pre-tax premiums for group health, dental and vision coverage have no IRS dollar limit.
A Section 125 cafeteria plan is a written employer plan under Internal Revenue Code Section 125 that lets employees choose between cash pay and qualified benefits paid with pre-tax dollars. An FSA, or flexible spending account, is an account inside the cafeteria plan that pays medical or dependent care costs with pre-tax pay. An HSA, or health savings account, is a tax-free account paired with a high-deductible health plan.
| Benefit in the cafeteria plan | Tax code section | 2026 limit | 2027 limit |
|---|---|---|---|
| Health FSA salary reduction | IRC 125(i) | $3,400 per employee | Not yet released |
| Health FSA carryover | IRS Notice 2020-33 | $680 | Not yet released |
| Dependent care FSA | IRC 129 | $7,500 per household ($3,750 married filing separately) | $7,500 (not indexed) |
| HSA, self-only coverage | IRC 223 | $4,400 | $4,500 |
| HSA, family coverage | IRC 223 | $8,750 | $9,000 |
| HSA catch-up, age 55 and older | IRC 223(b)(3) | $1,000 | $1,000 |
| Health, dental and vision premiums (premium conversion) | IRC 106 and 125 | No IRS dollar cap | No IRS dollar cap |
| Group-term life insurance | IRC 79 | First $50,000 of coverage tax-free | Same |
| Adoption assistance | IRC 137 | $17,670 per child | Not yet released |
Sources: IRS Revenue Procedures 2025-32, 2025-19 and 2026-24; Internal Revenue Code Sections 79, 125, 129, 137 and 223. The IRS usually publishes the next year's health FSA limit in its fall inflation adjustment release, typically in October or November.
Two limits people expect to see here are missing on purpose. Commuter benefits ($340 a month for transit and parking in 2026, per Revenue Procedure 2025-32) run under IRC Section 132, not Section 125. The Section 125 statute itself, in subsection (f), says Section 132 benefits are not qualified cafeteria plan benefits. Our 2026 Section 125 cafeteria plan guide explains what can and cannot sit inside the plan.
Is There an Overall Section 125 Plan Limit?
There is no overall Section 125 plan limit on total pre-tax elections. Internal Revenue Code Section 125 caps specific benefits, such as the health FSA, but it does not cap the total amount an employee can run through the plan.
That is why premium conversion matters so much. A premium only plan, or POP, is the simplest cafeteria plan: it lets employees pay their share of group health premiums pre-tax. If an employee pays $600 a month for family coverage, all $600 can come out pre-tax, with no IRS dollar ceiling.
The employer can always set lower limits than the IRS. A plan document can cap the health FSA at $2,500 even though the IRS allows $3,400. The plan document controls what each employee can actually elect.
There is one ceiling that works like an overall cap for owners. Under IRC Section 125(b)(2), if key employees receive more than 25% of all qualified benefits under the plan, the key employees lose the tax break on their benefits. A key employee in 2026 includes an officer earning more than $235,000 or a 5% owner, per IRS Notice 2025-67. Our guide to the key employee definition walks through the test.
What Were the Cafeteria Plan Limits for 2022 Through 2025?
The cafeteria plan limits from 2022 through 2025 rose each year for health FSAs and HSAs, while the dependent care FSA stayed at $5,000 until 2026. The health FSA limit was $2,850 in 2022, $3,050 in 2023, $3,200 in 2024 and $3,300 in 2025, per IRS revenue procedures.
| Year | Health FSA | FSA carryover | Dependent care FSA | HSA self-only | HSA family |
|---|---|---|---|---|---|
| 2022 | $2,850 | $570 | $5,000 | $3,650 | $7,300 |
| 2023 | $3,050 | $610 | $5,000 | $3,850 | $7,750 |
| 2024 | $3,200 | $640 | $5,000 | $4,150 | $8,300 |
| 2025 | $3,300 | $660 | $5,000 | $4,300 | $8,550 |
| 2026 | $3,400 | $680 | $7,500 | $4,400 | $8,750 |
| 2027 | Not yet released | Not yet released | $7,500 | $4,500 | $9,000 |
Sources: IRS Revenue Procedures 2021-45, 2022-38, 2023-34, 2024-40 and 2025-32 (health FSA and carryover); IRS Revenue Procedures 2021-25, 2022-24, 2023-23, 2024-25, 2025-19 and 2026-24 (HSA); IRC Section 129 as amended by the One Big Beautiful Bill Act (dependent care FSA).
The carryover limit is always 20% of that year's health FSA limit, per IRS Notice 2020-33. A plan can offer a carryover or a 2.5-month grace period, but not both for the same plan year, per IRS Notice 2013-71. Our guide to FSA grace period vs carryover rules covers the choice.
How Much Do Employers and Employees Save at the 2026 Limits?
Employers save 7.65% in FICA on every dollar employees elect through a cafeteria plan, and employees save FICA plus their income tax rate, per IRS Publication 15 (2026). An employee who uses the health FSA, dependent care FSA and pre-tax premiums can save over $2,600 a year.
FICA is the federal payroll tax for Social Security and Medicare. The employer pays 7.65% on wages and the employee pays another 7.65%, so the pre-tax dollar saves both sides.
Worked example: one employee at the 2026 limits
Take a hypothetical employee earning $60,000 in the 12% federal bracket. She pays $200 a month for health coverage, elects the $3,400 health FSA, and puts $7,500 into a dependent care FSA for daycare.
| Line | Math | Amount |
|---|---|---|
| Pre-tax health premiums | $200 x 12 | $2,400 |
| Health FSA | 2026 IRS limit | $3,400 |
| Dependent care FSA | 2026 IRS limit | $7,500 |
| Total pre-tax elections | Sum | $13,300 |
| Employee federal income tax saved | $13,300 x 12% | $1,596.00 |
| Employee FICA saved | $13,300 x 7.65% | $1,017.45 |
| Employee total tax savings | Sum | $2,613.45 per year |
| Employer FICA saved | $13,300 x 7.65% | $1,017.45 per year |
Rates: 12% federal bracket and 7.65% FICA per IRS Publication 15 (2026). State income tax savings would add more in most states. This example ignores the dependent care tax credit, which an employee cannot claim on the same dollars.
Worked example: a 25-person company
Now scale it. Say 25 employees average $6,000 a year in pre-tax elections, mostly premiums plus some FSA money. That is $150,000 moved out of FICA wages.
| Line | Math | Amount |
|---|---|---|
| Total pre-tax elections | 25 x $6,000 | $150,000 |
| Employer FICA saved | $150,000 x 7.65% | $11,475 per year |
| Employer FICA saved per employee per month | $11,475 / 25 / 12 | $38.25 |
The math behind this is covered in more depth in our guide to maximizing FICA tax savings.
Who Handles Cafeteria Plan Limits for a Small Employer?
A Section 125 plan administrator handles cafeteria plan limits for most small employers by writing the limits into the plan document, setting payroll caps and running nondiscrimination tests. Summit Health Benefits is a Section 125 plan administrator for small and mid-size employers.
Summit Health Benefits charges an admin fee of $35 per enrolled employee per month (PEPM). PEPM means the fee is billed only for employees who actually enroll. Summit Health Benefits pays that fee out of the employer FICA savings the plan creates, so under Summit's plan pricing the employer still nets about $56 to $101 per enrolled employee per month.
Limits also need yearly upkeep. When the IRS raises a limit, the plan document usually needs an amendment before employees can elect the new amount. Many employers had to amend by December 31, 2025 to allow the $7,500 dependent care FSA for 2026, per Polsinelli (2025).
The Summit Cafeteria Plan
A Section 125 plan with the plan document, summary plan description and nondiscrimination testing support built in. Compare Summit plans or build your plan.
What Should Employers Do Before the 2027 Plan Year?
Employers should confirm the 2027 limits, amend the plan document if limits change, and update payroll caps before open enrollment. The 2027 HSA limits are already final at $4,500 and $9,000 (IRS Revenue Procedure 2026-24), and the dependent care FSA stays at $7,500 because it is not indexed for inflation.
- Watch for the 2027 health FSA limit. The IRS usually releases it in October or November.
- Decide whether to adopt the new limit. The plan can keep a lower cap if you prefer.
- Amend the plan document before the plan year starts if the cap changes.
- Update payroll system caps so no employee can elect over the plan limit.
- Run nondiscrimination testing so key employees stay under the 25% concentration limit.
Our 2026 dependent care FSA limit guide and health FSA contribution limit guide cover each benefit in more depth, and our 2026 HSA contribution limits guide covers HSA eligibility.
Free copy-paste email to employees: 2026 cafeteria plan limits
Subject: Your 2026 pre-tax benefit limits
>
Hi team, here are the 2026 limits for our Section 125 cafeteria plan. Health FSA: up to $3,400, with up to $680 of unused money carried into next year. Dependent care FSA: up to $7,500 per household ($3,750 if married filing separately). HSA: up to $4,400 for self-only coverage or $8,750 for family coverage, plus $1,000 if you are 55 or older. Health, dental and vision premiums come out pre-tax with no IRS dollar cap. Elections are locked for the plan year unless you have a qualifying life event, so please plan carefully. Reply with any questions.See Your Savings at the 2026 Limits
Get Your Free Section 125 Plan Design With 2026 Limits Built In
Tell us your headcount and current benefits, and we will show which 2026 cafeteria plan limits fit your team and what they save you in employer FICA each month.
Frequently Asked Questions
What are the cafeteria 125 amounts for 2026?
What were the 2025 cafeteria plan limits?
What were the cafeteria plan 125 limits for 2024?
What were the cafeteria plan limits in 2022?
Is there a maximum amount for a Section 125 plan?
Can an employer set lower cafeteria plan limits than the IRS?
Sources
Internal Revenue Code Sections 79, 125, 129, 137 and 223 (Cornell Legal Information Institute, 2026); IRS Revenue Procedure 2025-32 (October 2025); IRS Revenue Procedure 2025-19 (2025); IRS Revenue Procedure 2026-24 (May 2026); IRS Revenue Procedures 2021-45, 2022-38, 2023-34 and 2024-40; IRS Revenue Procedures 2021-25, 2022-24, 2023-23 and 2024-25; IRS Notice 2013-71; IRS Notice 2020-33; IRS Notice 2025-67; IRS Publication 15 (2026); IRS Publication 15-B (2026); Mercer, Big Beautiful Bill permanently enhances dependent care benefits (2025); Polsinelli, New Year, New Dependent Care FSA Limits (2025).