HSA Rules Just Got Better for Long Island Employers

The IRS just released guidance that makes Health Savings Accounts significantly more attractive for Long Island employers. Notice 2026-05 expands HSA eligibility, increases contribution limits, and adds new tax-free reimbursement options that could save your business thousands in payroll taxes.

What Changed and Why It Matters to Your Bottom Line

Starting in 2026, employees with ACA Bronze and Catastrophic plans can now contribute to HSAs - a massive expansion from the previous requirement for High Deductible Health Plans only. This change affects approximately 10 million Americans who were previously locked out of HSA tax advantages.

More importantly for employers, HSA contribution limits increased again: $4,400 for individual coverage (up $100) and $8,750 for family coverage (up $200). Every dollar your employees contribute reduces your payroll tax burden - that's real money back in your pocket.

The biggest news is that HSA funds can now reimburse Direct Primary Care membership fees tax-free, up to $150 monthly for individuals and $300 for families. If you've been considering DPC as a cost-containment strategy, this makes it significantly more affordable for employees.

FSA Limits Also Increased - Don't Miss the Payroll Tax Savings

Health FSA limits rose to $3,400 (up $100), but the real story is Dependent Care FSAs jumping to $7,500 - the first increase in 40 years from the previous $5,000 limit. For employees with childcare costs, this represents $1,000+ in annual tax savings.

Here's what matters to you as an employer: every FSA dollar reduces both employee income tax and your share of payroll taxes. These contribution limit increases mean bigger savings for everyone involved.

The catch-up contribution for employees 55 and older remains at $1,000 additional for HSAs, providing another retention tool for experienced workers approaching retirement.

Getting ROI on Your Benefits Investment

Here's the problem most Long Island employers face: employees don't understand these changes, which means they can't appreciate what you're providing. If your staff doesn't know they can now use HSA money for Direct Primary Care or that contribution limits increased, they're not maximizing their tax savings - and they're not giving you credit as an employer.

When employees understand their benefits, they value them. When they value their benefits, they appreciate their employer. That appreciation translates directly into retention and easier recruiting. But if your team doesn't know about these HSA expansions, you get zero ROI on your investment.

Consider this: medical practices and professional service firms on Long Island are competing for the same talent pool. The employer who can clearly explain how an HSA saves employees $1,200+ annually in taxes has a significant recruiting advantage over one who just mentions "we offer health insurance."

Compliance Deadlines You Can't Miss

These changes take effect January 1, 2026, but planning starts now. Employees can still make 2025 HSA contributions until April 15, 2026 - a detail worth communicating during year-end planning.

If you offer High Deductible Health Plans, verify your 2026 numbers meet the new requirements: minimum deductibles of $1,700 individual/$3,400 family, with out-of-pocket maximums capped at $8,500/$17,000 respectively.

For employers considering adding HSAs or expanding existing programs, now is the time to evaluate options. The expanded eligibility rules mean more employees can participate, increasing the value proposition for your entire benefits package.

Making Sure Your Investment Pays Off

The best benefits package in Nassau County won't help with retention or recruiting if employees don't understand what they have. These HSA changes represent real money - hundreds or thousands in annual tax savings per employee - but only if your team knows how to use them.

That's where professional guidance makes the difference. Benton Oakfield's comprehensive benefits education ensures your employees actually understand these HSA enhancements, so they can appreciate what you're providing. Our enrollment meetings don't just explain plan options - we make sure your team understands exactly how much money they can save and how to access every benefit you're paying for.

When employees leave money on the table because they don't understand their benefits, you lose twice: first on the wasted premium dollars, then on the missed opportunity to build loyalty. Our approach ensures your benefits investment delivers maximum ROI through employee education and appreciation.

Contact Benton Oakfield to discuss how these HSA changes affect your specific situation and how we can help your employees maximize their tax savings while building loyalty to your business.

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.

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