2027 payroll limits: 401(k), HSA and FSA

The IRS has set what employees can contribute through payroll next year. The numbers, and what to update before the first January pay date.

RJ Ryan Joyce 2 min read

A short issue: the IRS’s 2027 limits on what employees can contribute through payroll, from its own notices.

Dates to know

Jan 1, 2027

Federal

Three payroll limits for 2027

1
401(k): employee limit rises to $25,500 for 2027Effective Jan 1, 2027 · Retirement plans. The IRS raised the most an employee can put into a 401(k) from pay in 2027, pre-tax and Roth contributions combined, along with both catch-up limits.
What to do: Confirm payroll has the 2027 limits before your first January pay date, and tell employees who want to contribute more to change their election.
2
HSA: 2027 limits are $4,500 self-only and $9,000 familyEffective Jan 1, 2027 · Health benefits. The IRS raised the 2027 limits on health savings account contributions.
What to do: Update the HSA limits in payroll before your first January pay date, and count any employer contribution toward each employee’s limit.
3
Health FSA: employee limit rises to $3,500 for 2027Effective Jan 1, 2027 · Cafeteria plans. Employees can put up to $3,500 into a health FSA through pre-tax salary reduction for plan years that start in 2027, up from $3,400.
What to do: Check the limit and carryover your plan document allows, then set the 2027 election limit before open enrollment closes.

Also worth knowing

  • Roth catch-up: An employee whose 2026 Social Security wages (W-2, Box 3) from the employer sponsoring the plan were more than $155,000 must make 2027 catch-up contributions as Roth. The threshold was $150,000. (IRS)
  • Commuter benefits: The monthly pre-tax limit rises to $350 for transit passes and vanpools and $350 for parking in 2027, from $340 each. (IRS)
  • SIMPLE plans: The employee limit for a SIMPLE IRA or SIMPLE 401(k) rises to $17,500 for 2027, from $17,000. (IRS)

Questions about this issue?

If you’re a VertiSource HR client. You do not need to translate every update in this issue into a payroll setting, policy, form or employee notice yourself. We handle the payroll and tax changes that fall on our side. When something requires action from you, your HR advisor will help identify what applies and what needs to change.

If you’re not a client. Every “What to do” line above is a task for someone at your company. Our clients hand the payroll and tax pieces to us and get an HR advisor for the rest.

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General information from VertiSource HR, not legal or tax advice. How a rule applies depends on your company and your state. Check with us or your attorney before acting.

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