As the new year approaches, it’s crucial for employers to stay informed about the latest changes in benefit plan limits since these adjustments can significantly impact financial planning and healthcare decisions.
In this blog we’ll break down the key updates for 401(k)s, Health Savings Accounts (HSA), Flexible Spending Accounts (FSA) and High Deductible Health Plans (HDHP).
401(k) Limits
Retirement planning gets a boost with increased 401(k) contribution limits for 2025. This allows your employees to set aside more money for the golden years, while potentially reducing the current tax burden.
Standard pre-tax contributions:
- In 2025, they will be able to contribute up to $23,500 to a 401(k) plan
- This is a $500 increase from 2024
Catch-up contributions:
- Those 50-59 can make additional “catch-up” contributions on top of the standard contributions
- Catch-up contributions remain steady at $7,500
- This means they can contribute a total of $31,000 in 2025
Special contributions:
- A special exception applies for employees ages 60-63, as their “catch-up” contributions can go up to $11,250
- This means they can contribute a total of $34,750 in 2025
Health Savings Account (HSA) Limits
HSAs offer tax advantages for healthcare expenses, allowing employees to save for current and future medical expenses.
Annual limitations on deductions:
- In 2025, the annual limit on HSA contributions for single coverage will be $4,300
- This is a $150 increase from 2024
- For family coverage, the annual limit will be $8,550
- This is a $250 increase from 2024
Catch-up contributions:
- Those 55 and older can make additional “catch-up” contributions on top of the standard contributions
- Catch-up contributions remain steady at $1,000
- This means they can contribute a total of $5,300 for a single individual and $9,550 for family coverage
Flexible Spending Account (FSA) Limits
FSAs expand to accommodate rising healthcare and dependent care expenses.
Annual contribution limits:
- In 2025, the annual limit of FSA contributions will be $3,300
- This is a $100 increase from 2024
High Deductible Health Plan (HDHP) Limits
HDHPs often come with lower premiums and the ability to contribute to an HSA.
Minimum limitations on deductions:
- In 2025, the minimum annual deductible for single coverage will be at least $1,650
- This is a $50 increase from 2024
- For family coverage, the minimum annual deductible will be $3,300
- This a $100 increase from 2024
Maximum limitations on deductions:
- In 2025, the maximum annual deductible for single coverage will be at least $8,300
- This is a $250 increase from 2024
- For family coverage, the maximum annual deductible will be $16,600
- This a $500 increase from 2024
What Limit Changes Mean for Your Employees
As benefit plan limits evolve, it’s essential to review what your business currently offers and consider adjusting your strategy:
- Maximize retirement savings: If possible, try to increase 401(k) contributions to take advantage of the higher limits.
- Optimize HSA: If eligible, consider maximizing HSA contributions for triple tax advantages.
- Review healthcare needs: Assess whether current plans still meet needs with the new HDHP limits.
- Careful FSA planning: While the increase is welcome, remember that FSA funds are typically “use it or lose it.”
Staying informed about these limit changes helps you make the most of your benefits package. As always, it’s wise to consult with a benefits advisor to ensure your choices align with the healthcare needs of your employees.
Remember, these limits are for the 2025 calendar year. Begin planning now to maximize your benefits!
