In the fast-paced world of human resources, staying updated on the latest regulations and compliance requirements is crucial. The end of the year is a particularly busy for HR professionals and benefits administrators.
The IRS annually adjusts employee benefit plan limits for inflation, so employers need to update their plans accordingly. This blog post will guide you through the employee benefit plan limits for 2025 and offer a comprehensive year-end checklist to ensure compliance and preparedness. We also provide two downloadable resources to support your work:
Comparing 2024 and 2025 limits
It's helpful to compare the benefit plan limits for 2024 and 2025 to understand the changes and prepare for the upcoming year.
[Download the full employee benefit plan limits for 2025]
Chart of inflation-adjusted limits: This comprehensive chart compares the 2024 and 2025 limits. Identify changes and plan adjustments with this easy-to-understand visual format.
Most limits increase for 2025: HR professionals need to communicate to employees that most employee benefit plan limits will increase and adjust their plans accordingly.
Non-indexed benefit limits: Some benefit limits, such as the dependent care FSA limit and the catch-up contribution limit for HSAs, are not indexed for inflation. HR teams must know these static limits when planning their benefits programs.
Year-end compliance tasks
HR professionals must prioritize year-end compliance tasks to ensure their employee benefit plans meet all regulatory requirements.
Some important areas are described below, accompanied by a downloadable checklist that contains benefits-related tasks to guide employers with the end of 2024 business.
[Download the year-end checklist]
1. Submitting gag clause attestations
Employers must submit gag clause attestations for their health plans or confirm that their issuer or third-party administrator has done so. This task is crucial to maintaining compliance with federal regulations.
2. Amending plan documents
HR teams should amend plan documents for any discretionary changes made in 2024. This step ensures that all plan details are up to date and accurately reflect any modifications.
3. Confirming annual notices
Employers must provide annual notices, such as the children’s health insurance plan (CHIP) notice, to employees. To ensure compliance, HR departments should verify that all required notices have been distributed.
4. Performing nondiscrimination testing
Nondiscrimination testing is a critical year-end task for ensuring that benefit plans do not disproportionately favor highly compensated employees. HR professionals should complete this testing to avoid potential penalties.
Employee benefits planning for 2025: Looking ahead
Looking ahead to 2025, HR professionals must take steps to prepare their employee benefit plans for the new year.
Ensure affordable health plan coverage
For applicable large employers (ALEs), ensuring that health plan coverage remains affordable for full-time employees is a top priority. HR teams should review their health plans and make any necessary adjustments to maintain affordability.
Update benefit plan limits
With new IRS limits in effect for 2025, HR professionals must update their benefit plan limits and revise employee communications accordingly. This process ensures that employees have accurate information about their benefits.
Revise employee communications
Employee communications, such as summary plan descriptions (SPDs), should be updated to reflect the 2025 benefit changes. Clear and accurate information helps employees make informed decisions about their benefits.
Additional considerations
Understanding employee benefit plan limits
Employee benefit plans are subject to annual dollar limits determined by the IRS, which are adjusted for inflation every year. Staying informed about these changes can help HR professionals manage their benefits programs effectively.
High-deductible health plans and health savings accounts: HDHPs paired with HSAs offer employees a way to save for medical expenses tax-free. The IRS sets the contribution limits for HSAs annually. For 2025, these limits are expected to rise, following the trend of previous years. HR professionals must ensure that their employees are aware of these changes to maximize their savings.
Health Flexible Spending Accounts: Health Flexible Spending Accounts (FSAs) allow employees to set aside pre-tax dollars for medical expenses. Like HSAs, the IRS adjusts FSA contribution limits annually. For 2025, HR teams should communicate the new limits to employees and update payroll systems to reflect these changes.
401(k) plans: 401(k) plans are a staple of retirement savings, offering tax advantages to both employees and employers. The IRS usually increases the contribution limits for 401(k) plans each year. HR professionals should ensure that these changes are reflected in employee communications and payroll systems.
Transportation fringe benefit plans: Transportation fringe benefits provide tax-free assistance to employees for commuting expenses. The IRS updates the limits for these benefits annually with inflation adjustments. HR departments must keep track of these changes to maintain compliance and inform employees.
IRS announcements and employer responsibilities
The IRS typically announces the dollar limits for the upcoming year before it begins. This advanced notice is crucial for employees to update their plan designs and ensure compliance with the new limits.
Importance of IRS announcements: IRS announcements provide the necessary information for HR professionals to adjust their benefits plans in line with the new limits. These updates are crucial for maintaining compliance and providing employees with accurate information.
Updating plan designs: Once the IRS announces the new limits, HR teams must update their plan designs to reflect these changes. This process involves revising plan documents, updating payroll systems and communicating changes to employees.
Ensuring compliance: Compliance with IRS regulations is a top priority for HR professionals. By staying informed about the latest announcements and adjusting plans accordingly, HR teams can avoid potential penalties and maintain a smooth benefits administration process.
The wrap-up
Navigating employee benefit plan limits and year-end compliance tasks can be a daunting process for HR professionals. However, staying informed about IRS announcements, updating plans and prioritizing compliance tasks can streamline the process and ensure success. By preparing for 2025 and keeping employees informed, HR teams can enhance their benefits programs and support their organization's overall goals.
For further resources and assistance with managing employee benefit plans, consider reaching out to industry experts or utilizing compliance tools designed to simplify the process. You can also contact TruePlan Benefit and Retirement Advisors to learn more about employee benefits and plan management.