FSA Limits and Options
| Feature | 2026 | 2027 |
|---|---|---|
| Health FSA contribution limit | $3,300 | $3,400 |
| Carryover maximum | $660 | TBD (indexed) |
| Grace period | 2.5 months after plan year end | 2.5 months after plan year end |
| Dependent care FSA limit | $5,000 ($2,500 MFS) | $5,000 ($2,500 MFS) |
Carryover vs. Grace Period
Employers may offer either a carryover (up to $660 in 2026) or a 2.5-month grace period — but not both. The carryover allows employees to carry unused funds into the next plan year; the grace period allows employees to use prior-year funds for expenses incurred during the first 2.5 months of the new plan year. The carryover is generally more valuable to employees.
FSA and HSA Compatibility
Compliance Note
A general-purpose health FSA disqualifies the employee from HSA contributions — even if the FSA has a $0 balance. To maintain HSA eligibility, the FSA must be a limited-purpose FSA (covering only dental, vision, and preventive care) or a post-deductible FSA. If you offer both an HDHP/HSA and a health FSA, confirm the FSA is limited-purpose.