Planning around pending IRS benefit updates

Employee benefits programs operate within a complex regulatory framework, and annual IRS guidance helps employers determine the contribution limits, exclusions, and thresholds that apply to their plans. As organizations prepare for the 2027 plan year, these updates can play an important role in maintaining compliance, supporting plan administration, and informing benefit-related decisions throughout the year.

Some annual benefit limits are available well in advance of the upcoming plan year. For example, the IRS released the 2027 health savings account (HSA) limits in May 2026, giving employers ample time to prepare for the year ahead. Other benefit limits, including those for health flexible spending accounts (FSAs), commuter benefits, adoption assistance, and educational assistance, are typically not announced until later in the year.

For employers conducting open enrollment before those figures become available, the timing can create scheduling challenges. Enrollment materials, payroll systems, and employee communications often move forward before all annual limits are finalized.

This article explores how employers can plan around pending benefit updates from the IRS while keeping enrollment and administrative activities on track.

Annual benefits limits

Several commonly offered benefit programs are subject to annual IRS inflation adjustments. For the 2027 plan year, employers may be watching for updated limits across many of these programs. These annual updates establish the maximum amounts employees may contribute or receive through eligible programs and can influence plan communications and administrative processes.

While many annual adjustments result in relatively small increases, 2027 includes one notable change. The annual exclusion for employer-provided educational assistance under Section 127 has remained unchanged at $5,250 for decades. Beginning in 2027, however, that amount will be indexed for inflation. Employers offering educational assistance programs will want to watch for the new figure.

Once the final figures are released, employers can evaluate whether related materials and systems need updating. The challenge for many organizations is that planning activities often begin long before the final numbers become available, leaving a gap between open enrollment preparation and IRS guidance.

Open enrollment and pending limits

Late IRS benefit updates can create planning challenges during open enrollment. Employers may already be coordinating vendors, preparing enrollment materials, and finalizing system changes while annual inflation-adjusted limits are still pending. As a result, decisions are often made before all applicable figures are available.

The timing can be especially challenging for employers processing their open enrollments during the fourth quarter. Even when updated limits are announced in October and November, many employers are already in the final stages of their enrollment activities. At that point, even modest increases in limits can require updates to a variety of printed and virtual enrollment-related resources.

Among the pending limits, the health FSA maximum often receives the greatest attention because it directly affects employee elections for the upcoming year. When the final IRS limit has not yet been announced, employers often establish a plan in advance to minimize administrative disruption and maintain enrollment timelines. Several options are available for managing unreleased health FSA limits without disrupting the enrollment timeline.

Addressing pending limits

For employers caught in the timing mismatch of conducting open enrollment while awaiting official IRS announcements, there are several possible solutions. The most appropriate strategy may depend on enrollment timelines, administrative capabilities, and the flexibility of the organization’s benefits administration systems.

Common approaches include the following:

• Map to the maximum. Employees who elect the current year maximum are automatically adjusted to the new IRS limit once it is announced. This approach can reduce the need for additional employee action and limit administrative follow-up.
• Use a projected limit. Employers may permit elections up to a reasonable projected amount, accompanied by clear communications that the final IRS limit remains pending and may differ from the amount initially presented during enrollment.
• Provide a limited election adjustment window. Some employers allow employees to revisit affected elections after final IRS guidance is released, but before the start of the plan year.
• Maintain current-year limits. Employers may elect to retain existing limits until official guidance becomes available. While this approach avoids assumptions about future adjustments, it may require additional administrative updates once final figures are released.

Health FSAs often present the greatest challenge when limits are delayed because employees generally make a single annual election during open enrollment. If the updated limit is released after enrollment materials are finalized, employers may need to determine whether elections will be adjusted automatically, modified through a limited reenrollment process, or maintained at the prior year’s limit. Clear communication can help establish expectations and reduce confusion if final guidance results in changes to available election amounts.

Commuter benefit limits apply to monthly transit and parking elections, not to a single election locked in during open enrollment. Because employees can generally adjust these elections throughout the year, many payroll and benefits administration systems apply the new IRS limit automatically once it is released, without requiring a separate correction.

Adoption assistance programs operate differently because the annual limit applies to eligible reimbursements rather than employee payroll deduction elections. As a result, delayed IRS guidance typically creates less disruption during open enrollment. Employers may still need to update plan documents and reimbursement limits once the final figure becomes available.

Educational assistance programs follow the same timing pattern, since 2027 is the first year the Section 127 exclusion has changed. Employers offering educational assistance programs should plan to update plan documents, summary plan descriptions, and payroll caps once the first indexed figure is announced.

Although the operational impact varies by benefit, employers that monitor pending IRS updates and establish a plan before open enrollment begins may be better positioned to incorporate annual changes without last-minute disruptions to enrollment activities.

Summary

Annual IRS benefit updates remain a standard part of the planning process, although the timing may vary from year to year. Understanding which limits are still pending and establishing an approach before open enrollment begins can help employers incorporate new figures with less disruption and greater confidence.

Whether an employer chooses to map elections to a new limit, use a projected amount, or reopen elections after updated figures are released, selecting a path forward in advance can help streamline administration and support a positive enrollment experience for employees. The same planning applies to the commuter, adoption assistance, and educational assistance limits, even though the administrative steps differ for each.

Contact us today to review whether your benefits program is affected by pending IRS limits and discuss strategies for managing open enrollment while final IRS guidance is still pending.

This Benefits Insights is not intended to be exhaustive, nor should any discussion or opinions be construed as professional advice. © 2026 Zywave, Inc. All rights reserved.