2027 FSA, Retirement Plan Contribution Limits
Open enrollment season has begun, when employees usually plan for their 2027 employer-offered benefits. This can include choosing whether they can or will participate in flexible spending arrangements (FSAs), health savings accounts (HSAs) and/or contribute to their retirement. The Internal Revenue Service (IRS) recently released its 2027 annual inflation adjustments, so employers may want to communicate these changes to their employees.
Retirement Plan Contribution Limits
In 2027, individuals can annually contribute up to $25,500 to their 401(k) plans, up from $24,500 in 2026. This annual contribution limit also affects employees who participate in 403(b) and governmental 457 plans as well as the federal government’s Thrift Savings Plan.
For Individual Retirement Arrangements (IRAs), the 2027 annual contribution limit will remain at $7,500, the same as 2026.
The 2027 catch-up contribution limit that generally applies to employees aged 50 and over who participate in most workplace retirement plans will be $8,500, so those participants can contribute up to $34,000 next year.
Under a change made in 2025, a higher catch-up contribution limit now applies for employees aged 60, 61, 62 and 63 who participate in these plans. For 2027, this higher catch-up contribution limit will increase to $11,750 instead of the $8,500 noted above for employees aged 50 and over. Those 60- to 63-year-old employees can contribute a total of $37,250.
Additionally, the income ranges for determining eligibility to make deductible contributions to traditional IRAs, to contribute to Roth IRAs and to claim the Saver’s Credit all increased for 2027.
Flexible Spending Arrangements (FSAs)
FSAs allow employees to pay for qualified medical expenses not covered by their health plan, including co-pays, deductibles, and a variety of medical products and services ranging from dental and vision care to eyeglasses and hearing aids.
In 2027, eligible employees may annually contribute up to $3,500 to an FSA — also called a flexible spending account — which is an increase of $100 from 2026. For cafeteria plans that permit the carryover of unused amounts, the 2026 maximum carryover amount is $700, an increase of $20 from 2026.
Prior to the plan year’s start, employees must elect their annual contribution amount for their FSA via payroll deduction. As FSAs operate under a use-it-or-lose-it rule, employees should carefully estimate their eligible health care expenses and only contribute funds they are certain they will spend. Any unspent funds remaining after the grace period (if applicable) or the plan year’s end will be forfeited.
And don’t forget — the IRS has already released the 2027 inflation-adjusted HSA amounts. HSAs are pre-tax accounts available to individuals covered under a high-deductible health plan, allowing eligible individuals to accumulate tax-free money to pay for qualified medical expenses.
CalChamber members can read more about Health Saving Accounts and Private Retirement Savings Plans in the HR Library. Not a member? Learn more about what CalChamber can do for your business.