Compliance Corner: New Federal Updates for 2026

As the calendar has turned to 2026, HR teams have a long to-do list. As we mentioned previously, 19 states and many cities are raising the minimum wage this year. Several federal changes are also coming in 2026.

From cost-of-living and inflation adjustments to provisions in the One Big Beautiful Bill Act, here are the federal compliance changes HR teams should have on their radar for 2026.

Cost of Living Adjustment (COLA)

Approximately 75 million Americans are eligible for Social Security and Supplemental Security Income (SSI), an increase is coming in 2026.

Effective Date: January 1, 2026

• Social Security and SSI benefits will increase by 2.8% in 2026 based on CPI-W changes

Maximum Taxable Earnings for Social Security

• 2025: $176,100

• 2026: $184,500

• In 2026, Social Security taxes apply only to the first $184,500 earned and any earnings above that amount are not taxed for Social Security

Tax Rates

• For employees, 7.65% of their paycheck goes toward Social Security and Medicare

• Employees making more than $200,000 pay an extra 0.9% for Medicare

Benefits

• The maximum Social Security check for someone retiring at full retirement age will be about $4,152 per month in 2026, up from $4,018 per month in 2025

Estimated Average Monthly Benefits After COLA (2026)

• All Retired Workers: $2,071

• Aged Couple: $3,208

• Disabled Worker: $1,630

Disability

• Individuals on disability can earn up to $1,690 per month or $2,830 per month for blind individuals before it affects benefits

• Trial work period: Individuals on a trial work period can earn up to $1,210 per month without losing benefits

Fringe and Account-Based Benefits Plan Updates

There are several provisions from the budget reconciliation bill, more commonly known as the One Big Beautiful Bill Act.

Effective Date: January 1, 2026

Bicycle Commuter Reimbursement Exclusion

• Tax-free reimbursements for bicycle commuting expenses remain excluded indefinitely

• This exclusion was previously temporary for tax years 2018 through 2025

• Employers cannot reinstate bicycle commuter expenses as a tax-free benefit starting in 2026

• Employers should update fringe benefits documents to remove any references to the previous temporary exclusion dates

Dependent Care Flexible Spending Account Limit (DCFSA)

• The DCFSA Contribution limit will increase to $7,500 for plan years beginning in 2026

• Increasing the limit is optional for employers. However, employers who choose to adopt the increase must update cafeteria/benefits plan documents and notify employees before January 2026

Direct Primary Care Service Arrangements

• Employees can contribute to a Health Savings Account (HSA), even if they’re enrolled in a direct primary care service arrangement (a contract between an individual and primary care physicians for care for a monthly fee)

• Employees may use HSA funds to pay the monthly cost of qualifying direct primary care arrangements, but the monthly fee must be $150 or less per person

• This change removes previous restrictions that prevented HSA contributions when using direct primary care services

ACA Affordability Threshold Increasing

Effective Date: January 1, 2026

• The Affordable Care Act (ACA) affordability threshold will increase to 9.96% for plan years beginning in 2026

• This applies to large employers under the ACA “play or pay” rule.

• The limit is based on one of three measures: an employee’s W-2 wages, their rate of pay and the federal poverty line

• Employers must keep the employee’s share at or below this percentage to meet ACA affordability requirements.

ACA Out-of-Pocket Limits (OOP)

The amount that individuals pay for essential health benefits annually, or OOP, is rising in 2026.

Effective Date: January 1, 2026

Health Flexible Spending Accounts (HFSAs)

• Self-coverage only: $10,600 ($1,400 increase from 2025)

• Family coverage: $21,200 ($2,800 increase from 2025)

• The ACA out-of-pocket maximums apply to in-network EHBs

Inflation-Adjusted Amounts for HSA and HDHP

There are changes for HSAs and High-Deductible Health Plans (HDHPs) inflation-adjusted amounts this year. Effective Date: January 1, 2026

Annual HSA contribution limits

• Self-coverage only: $4,400 ($100 increase from 2025)

• Family coverage: $8,750 ($200 increase from 2025)

• The annual catch-up contribution maximum remains unchanged at $1,000 for HSA-eligible individuals age 55 or older

Minimum annual HDHP deductible

• Self-coverage only: $1,700 ($50 increase from 2025)

• Family coverage: $3,400 ($100 increase from 2025)

Maximum annual HDHP out-of-pocket expenses (deductibles, copayments and other non-premium amounts)

• Self-coverage only: $8,500 ($200 increase from 2025)

• Family coverage: $17,000 ($400 increase from 2025)

• This applies to all HDHPs, regardless of whether they’re for essential health benefits (EHBs) or not

IRS 2026 Annual Benefit Maximums

Effective Date: January 1, 2026

HFSAs

• The HFSA contribution limit is $3,400

• For HFSAs that include a carryover feature, the maximum carryover is $680

Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)

• The maximum total for all QSEHRA reimbursement and payments is $6,450 for single coverage and $13,100 for family coverage

Adoption Assistance Programs

• The maximum employee tax credit and amount an employer can provide for adoption assistance is $17,670

• The tax credit begins to phase out for individuals with modified adjusted gross income above $265,080 and is completely phased out at $305,080 and above

Qualified Commuter Plans: Mass Transit and Parking

• The monthly limit for both qualified parking and mass transit is $340

IRS 2026 Patient-Centered Outcomes Research Institute (PCORI) Fee

The PCORI fee, which funds the Patient-Centered Outcomes Research Trust Fund, is changing this year.

Effective Date: January 1, 2026

• The PCORI fee will be $3.84 per covered person (up $0.37 from last year)

• This applies to plan years ending between October 1, 2025, and October 1, 2026

Reporting and Paying

• Report once a year, during the second quarter, and payment is due by July 31

IRS 2026 Retirement Maximums

The annual contribution limit for 401(k) plans will increase to $24,500, up from $23,500 in 2025.

• The annual catch-up contribution limit will increase to $8,000 (from $7,500 in 2025) for participants age 50 and above

• The annual catch-up contribution, introduced by the SECURE Act 2.0 for participants between ages 60 to 63, remains at $11,250 annually

• The annual contribution limit for IRAs will increase to $7,500 (from $7,000 in 2025)

• The annual catch-up contribution limit will increase to $1,100 (from $1,000 in 2025) for participants age 50 and over

Federal Employer Tax Incentive Permanent Paid Leave Tax Credit

Under the Section 45S Employer Credit for Paid Family and Medical Leave, a tax credit is available for employers who provide paid family and medical leave.

Effective Date: January 1, 2026

• Credit Amount: 12.5%–25% of wages paid during qualifying leave (up to 12 weeks per year)

• Eligibility: A written policy required and leave must cover FMLA reasons and pay at least 50% of wages

• Applies only to voluntary or excess leave beyond state/local mandates

Staying current with compliance changes can feel like a full-time job. isolved HR Services can help you track updates and stay prepared.

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