Employee Benefit Plan Contribution Limits for 2025

Written by Chase Charaba | November 27, 2024 at 8:32 PM

A new year brings new contribution limits for various employee benefit plans. If you’re currently offering benefits or looking to enhance your benefits package in 2025, you need to be aware of the changes to maximum contribution limits. This will help you determine if your benefits follow federal rules and whether you need to adjust your contributions.

In this blog, you’ll learn:

What the 2025 contribution limits are for various employee benefits

How these new limits compare to the previous year

Why offering benefits with defined allowances to your employees can be beneficial to your business

What are defined contribution benefits?

Traditional employee benefits like pension plans or group health insurance are falling out of favor. This is because these defined benefit plans are often too expensive, rigid, or complicated for employers to administer. Instead, many employers are switching to defined contribution plans.

A defined contribution plan is an employer-sponsored benefit in which the employer and sometimes the employee contribute a defined amount of money to an individual account or arrangement. These plans allow employers to set aside a certain amount of money for their employees. This gives employees more freedom over how to use their benefits, such as how to use or invest their funds.

Defined contribution generally refers to retirement plans under section 401(a). However, other types of benefits, like health benefits, have started to follow a similar model.

Here are some examples of benefits with defined allowances or contributions:

401(k) retirement plan: Instead of offering a pension plan, most organizations offer a 401(k) benefit. With this type of plan, employees defer part of their income into an individual account. Employers can also contribute, generally with an employer match. A 401(k) is often cheaper than providing a pension plan, and it gives employees more control over how to invest their funds for growth.
Health reimbursement arrangement (HRA): Much like the shift from pensions to 401(k)s, employers are moving from group health insurance to HRAs. An HRA allows employers to reimburse their employees for qualifying medical expenses. The two most popular options are the qualified small employer HRA (QSEHRA) and the individual coverage HRA (ICHRA). With a QSEHRA or ICHRA, you can reimburse employees for their individual health insurance plans, giving them more choice when it comes to their coverage. An HRA is often more affordable and flexible than group health insurance. This makes it an excellent option for small businesses.
Health savings account (HSA): An HSA allows employees to put aside money for future medical expenses. Both employers and employees can contribute, but the employee owns the account.
Flexible spending account (FSA): An FSA allows employees to contribute money to an arrangement for medical expenses up to a set annual limit. Employers can also contribute to the benefit.
Qualified transportation and parking benefits: The IRS also allows employers to offer transportation and parking benefits up to an annual tax-free limit. Employees can use these commuter benefits on transit passes, parking, and vanpools.

What are the 2025 employee benefit plan contribution limits?

The IRS lists annual limits for most fringe benefits in IRS Publication 15-B¹. Additionally, the IRS releases several revenue procedures throughout the year with updates to contribution limits for the following year. Understanding these new limits will help you maximize your benefit offerings.

The sections below include the 2025 benefit limits and thresholds that employers and employees need to know.

Health benefit limits in 2025

The table below compares the 2025 health benefit annual contribution limits to 2024.

Benefit type	2025 annual limit	2024 annual limit
Health savings account (HSA) contribution limit²(for employer + employee contributions)	Self-only: $4,300 Family: $8,550 Age 55+: Additional $1,000 catch-up contribution	Self-only: $4,150 Family: $8,300 Age 55+: Additional $1,000 catch-up contribution
Qualified small employer HRA (QSEHRA) maximum contribution³	Self-only: $6,350 ($529.16 monthly) Family: $12,800 ($1,066.66 monthly)	Self-only: $6,150 ($512.50 monthly) Family: $12,450 ($1,037.50 monthly)
Excepted benefit HRA (EBHRA) maximum contribution²	$2,150	$2,100
Health flexible spending account (FSA) contribution limit³	$3,300 Maximum rollover: $660	$3,200 Maximum rollover: $640

Retirement benefit limits in 2025

The IRS announced an increase in the annual employee deferral limit for 401(k) plans, 403(b) plans, and the federal government’s Thrift Savings Plan for 2025.

There’s also a new “super catch-up” contribution for those aged 60 to 63. This change stems from the Secure 2.0 law that Congress passed in 2022.

The table below compares the 2025 401(k) and defined contribution plan limits to 2024 limits.

Benefit type	2025 annual limit	2024 annual limit
Elective deferrals for 401(k) plans⁴and 402(g) for those age 49 or younger	$23,500	$23,000
401(k) catch-up contribution limits for employees age 50 or older	$7,500 ($31,000 total)	$7,500 ($30,500 total)
401(k) new super catch-up contributions for employees aged 60-63	$3,750 ($34,750 total)	N/A
Defined contribution maximum for employer + employee contributions for employees 49 or younger. This accounts for all retirement sources	$70,000	$69,000
Contribution limits for 403(b) plans	$23,500	$23,000

Other employee benefit limits in 2025

Health benefits and retirement benefits aren’t the only types of plans with defined contributions. The table below includes other benefits with new 2025 limits.

Benefit type	2025 annual limit	2024 annual limit
Cents-per-mile reimbursement	Awaiting release	$0.67/mile
Qualified transportation benefits³	$325/month	$315/month
Qualified parking benefits	$325/month	$315/month
Adoption assistance programs³	$17,280 for those who earn $259,190 or less.	$16,810 for those who earn $252,150 or less
Dependent care FSA, or DCAP, limits	$5,000	$5,000
Education assistance, including student loan repayment	$5,250	$5,250

What are the advantages of offering a benefit with a defined contribution or allowance?

Offering a defined contribution to employees, whether related to retirement savings or health plans, provides several advantages.

Some key benefits of adopting a defined contribution approach include the following:

Flexibility and personalization: Offering an allowance or contribution allows employees to tailor their benefits to meet their individual needs and preferences. For example, with a defined contribution health plan, employees can enroll in a health policy that works best for them.
Cost control for employers: Employers benefit from predictable budgeting. They can set fixed contribution amounts for employee benefits. This helps you manage costs and reduce your financial risk. This makes it possible for small businesses to offer various benefits.
Empowering employees: Employees can take charge of their own benefits. By allowing them to decide where to allocate their contributions, they get a sense of ownership.

Conclusion

Understanding the changes to contribution limits for employee benefit plans in 2025 will help you ensure compliance. It also helps you and your employees maximize the potential of defined contribution benefits.

If you want to break free from traditional group health insurance, PeopleKeep can help. Our HRA administration platform makes it easy to offer your employees a defined contribution for their healthcare expenses. Contact an HRA specialist to learn more.

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