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As we approach 2026, employers sponsoring cafeteria plans may take advantage of several important developments that permit optional changes to plan design and administration.

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Beginning in 2026, the statutory limit for Dependent Care Flexible Spending Accounts (“DCFSAs”) will increase from $5,000 to $7,500. Employers who wish to adopt this higher limit for 2026 must timely amend their cafeteria plans before the end of 2025.

Recent IRS guidance indicates that employers may be permitted to allow employees to contribute pre-tax to, and potentially receive employer contributions to, the Trump Account of a “dependent” (which may be defined differently compared to other benefit rules)f through a cafeteria plan. Trump Accounts are new tax-advantaged savings arrangements for minors introduced under the One Big Beautiful Bill Act (“Act”). Although the recent guidance sheds some light on anticipated features, details remain limited, but the IRS intends to issue proposed rules consistent with this guidance. Employers who wish to implement these changes will likely need to adopt an amendment before contributions can be permitted. However, under the Act, contributions to a Trump Account cannot be made prior to July 4, 2026.

Health FSA and Carryover Limit Adjustments

Annual inflation adjustments continue to impact Health FSA contribution limits and carryover amounts. For 2026, the Health FSA contribution limit will increase from $3,300 to $3,400 and the carryover amount (for amounts carried over to 2027) will increase from $660 to $680.<br> Nondiscrimination Testing Considerations

Changes in benefit elections (particularly if the increased DCFSA limit is adopted) may affect nondiscrimination testing. Employers should plan ahead for projection testing early in 2026 to avoid surprises and ensure compliance with all applicable nondiscrimination tests, including those under Internal Revenue Code Sections 125 and 129.

Determine whether the company intends to implement any permitted changes and timely communicate how employees can take advantage of these changes.

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Prepare to amend cafeteria plan documents before December 31, 2025, for any changes that will be effective January 1, 2026, such as the higher DCFSA limit and Health FSA contribution and carryover limits. <strong>As a reminder, the cafeteria plan must be amended prospectively before implementing a new feature or limit.</strong>

Prepare to conduct projection nondiscrimination testing early in 2026 to proactively identify and address any concerns.

Stay tuned for additional IRS guidance regarding Trump Accounts, as these accounts could represent a notable new benefit option.

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2026 Cafeteria Plan Benefits Buffet

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