Section 125 Cafeteria Plans

Health Care Reimbursement – 2025 Update

The Health Care Reimbursement portion of a Flexible Spending Account (FSA) allows an eligible employee to pay for certain health care expenses on a pre-tax basis. The annual limit for submitted expenses in 2025 is $3,300 per employee. You may be reimbursed for eligible expenses incurred August 1, 2025 through July 31, 2026, provided they are submitted by October 31, 2026 (or by your plan’s specific deadline).

It is important to be conservative when participating in this portion of the plan. If you do not use your deferral funds by the end of the plan year, you will be able to roll over up to $660 in unused funds to be used in the next FSA plan year. Any unused funds greater than $660 will be forfeited under the IRS “use it or lose it” provision.

2025 EXAMPLES:

• Example 1:
  Jane sets aside $500 in 2025 through payroll deductions. If Jane only submits $400 in eligible expenses during 2025, she cannot receive the balance in cash, but the remaining $100 will be rolled forward into the 2026 Plan Year.
• Example 2:
  Jane sets aside $1,000 in 2025 through payroll deductions and only submits $300 in eligible expenses during the plan year. She can only roll over up to $660 into the 2026 Plan Year and would forfeit any unused amount beyond that limit.

This makes careful planning for Health Care Reimbursements very important. Included in this communication and available online is a list of eligible expenses. Please review these expenses and utilize online tools to estimate your annual expected eligible expenses.

Dependent Care Expenses – 2025 Update

Qualified Dependent Care Expenses can also be paid on a pre-tax basis. In 2025, you may set aside up to:

• $5,000 per household (if single or married filing jointly)
• $2,500 if married and filing separately

This helps pay for qualified dependent care expenses that enable you and your spouse (if married) or domestic partner to work or attend school full-time.

Like the Health Care Reimbursement plan, expenses must be incurred before a reimbursement request is submitted. The “Use It or Lose It” provision applies here as well, but there is no provision to carry over unused funds to the next Plan Year. However, dependent care expenses are often more predictable than health care expenses, making planning simpler.

Be sure to use available online tools to estimate your annual expenses for dependent care.

For a complete list of eligible expenses for both Health Care and Dependent Care FSAs, please refer to the resources provided by your benefits administrator.