Ancillary Benefits Updates Hit Long Island Employers

The dependent care FSA limit just jumped from $5,000 to $7,500 for 2026—the first increase since 1986. That's a 50% boost that affects how Long Island employers structure their ancillary benefits packages. But it's not the only change hitting your dental, vision, disability, and supplemental coverage this year.

What Changed for Ancillary Benefits in 2026

Beyond the FSA increase, several regulatory shifts are reshaping ancillary benefits:

• HSA Expansions: New IRS rules allow telehealth services and direct primary care without breaking high-deductible health plan status
• Federal Poverty Level: Set at $15,960 for 2026, affecting affordability calculations for ACA-compliant ancillary coverage
• Roth Catch-Up Rules: Employees earning over $150,000 must use Roth contributions for catch-up amounts in retirement plans
• Enforcement Focus: The Department of Labor is prioritizing mental health parity and cybersecurity reviews for welfare plans

The Real Cost of Ancillary Benefits Confusion

Here's the problem: 62% of employees are confused during open enrollment, and 71% are dissatisfied with benefit cost breakdowns. That means you're paying for dental, vision, and disability coverage that employees don't understand or appreciate.

Rising health costs—up 4-8% for one-third of employers—are pushing more cost-sharing to employees. This makes ancillary benefits more valuable as gap-fillers, but only if employees know what they have.

For Long Island employers with 10-50 employees, this creates a double hit: you're paying premium dollars for benefits that provide zero employee satisfaction or retention value.

Compliance Risks You Can't Ignore

The DOL's enforcement priorities directly impact ancillary benefits. Mental health parity rules apply to your disability coverage. Cybersecurity requirements affect how you handle employee data in benefit administration. Surprise billing protections extend to some supplemental coverage.

Small employers often overlook these requirements because they seem focused on major medical plans. But welfare plan rules cover your entire ancillary benefits package.

The new MEWA relief program highlights another risk: if you're part of any group purchasing arrangement for ancillary benefits, you might have inadvertent compliance obligations you don't even know about.

Taking Advantage of New Opportunities

The FSA increase creates immediate opportunities. Employees with childcare costs can now set aside $2,500 more in pre-tax dollars. That's real money—potentially $625-$875 in tax savings per employee depending on their bracket.

HSA expansions make high-deductible plans more attractive by allowing telehealth access. This can help you offer lower-premium options while maintaining employee satisfaction through convenient care access.

Digital enrollment platforms are boosting ancillary benefit participation by 35%. The key is clear communication about what coverage costs and what it covers.

What Long Island Employers Should Do Now

First, review your plan documents. The dependent care FSA increase requires amendments if your plans don't automatically adjust to IRS limits. Missing this means employees can't access the higher contribution levels.

Second, audit your ancillary benefits communication. Your dental, vision, life, and disability coverage should be explained in dollars, not just percentages. Employees need to understand both what they pay and what they get.

Third, coordinate with your retirement plan advisor on the Roth catch-up requirements. This affects high earners who might also be interested in maximizing other ancillary benefits.

Finally, prepare for increased DOL scrutiny. Document your mental health parity analysis for disability benefits. Review cybersecurity protocols for benefit data. Ensure COBRA notices cover all welfare plans, not just medical.

Rather than scrambling to understand these complex requirements, Benton Oakfield handles compliance monitoring and plan document updates so you can focus on running your business. We also provide the enrollment education that turns your ancillary benefits investment into actual employee appreciation and retention.

Compliance Note: Benefit plan rules and tax implications vary based on company size and location. This summary is for informational purposes only. Please contact your Benton Oakfield representative to review how these changes impact your specific plan documents.