by admin | Feb 9, 2026 | Blog
Adoption is a life‑changing journey, but it also comes with significant financial challenges. While the federal adoption tax credit offers meaningful relief, many employees still struggle to cover upfront expenses or fully benefit from the credit. For employers—especially small companies working with tight benefits budgets—the question often becomes: Should we offer adoption assistance benefits when a tax credit already exists?
The short answer: yes. And here’s why.
1. Adoption Expenses Often Exceed the Federal Tax Credit
For 2026, the federal adoption tax credit allows up to $17,670 per child, with up to $5,120 refundable. While helpful, adoption costs can easily surpass these limits. Private domestic, agency, and international adoptions often range from $20,000 to over $50,000.
Employer adoption assistance can help fill this financial gap, reducing out‑of‑pocket expenses for employees and making adoption more accessible.
2. Employees Typically Use the Tax Credit First—But It Doesn’t Replace Employer Support
Because employer‑provided adoption benefits are treated as taxable wages for FICA purposes, most employees will understandably use the tax credit first. The credit usually offers greater financial value upfront.
However, the credit alone rarely covers all expenses—and employees can use both the tax credit and employer reimbursement, as long as it’s not for the same dollar of expense.
Employer benefits remain a critical supplement.
3. Lower‑Income Employees Often Can’t Use the Full Tax Credit
Even with a partially refundable credit, lower-income employees may not have enough tax liability to use the credit’s full value. While unused credits can be carried forward for up to five years, not everyone benefits fully before credits expire.
Employer-provided assistance can help bridge the gap, giving employees meaningful financial support regardless of their tax liability.
4. Employer Reimbursements Improve Employee Cash Flow
Unlike the tax credit—which can only be claimed after finalizing expenses—adoption assistance benefits can provide immediate financial relief. Whether through direct payments or quick reimbursements, employer support can help employees:
- Avoid costly personal loans
- Manage sudden or large adoption expenses
- Reduce financial stress during an emotionally intense process
For many families, improving cash flow is just as valuable as reducing the total cost of adoption.
5. Employers Can Offer Adoption Benefits With Minimal Cost
One major misconception is that offering adoption benefits requires a large employer contribution. In reality, a qualified adoption assistance program can be established with little or no employer funding.
Here’s how:
- Employees can use pre‑tax salary reductions to fund adoption expenses through a cafeteria plan.
- Special‑needs adoptions receive unique tax treatment—employees may qualify for a full income tax exclusion simply because an employer has a qualifying program in place, even if the employer contributes nothing.
This means even small companies can provide meaningful value at minimal cost.
6. Adoption Benefits Strengthen Recruitment, Retention, and Culture
Today’s workforce cares deeply about family-friendly policies. Adoption assistance benefits can:
- Set your company apart from competitors
- Support diversity in family-building paths
- Foster a compassionate, inclusive culture
- Appeal to employees who value equity between biological and adoptive parents
Since most employers already subsidize the cost of childbirth through health insurance, offering adoption benefits promotes fairness and signals a genuine commitment to employee well-being.
Even with a federal tax credit in place, employer-provided adoption assistance benefits offer unique financial, emotional, and practical support that the tax credit alone cannot. For many companies—large and small—these benefits are a powerful way to demonstrate values, strengthen your employer brand, and support employees as they grow their families.
Source: Thomson Reuters
by admin | Dec 11, 2025 | Blog
The IRS has shared new details about Trump Accounts (TAs)—special savings accounts for kids under 18 created by a law passed in July 2025. These accounts help parents and employers save for a child’s future.
What Are Trump Accounts?
- A TA is like a retirement account, but for minors.
- Parents or guardians can open one for their child.
- Contributions can come from parents, employers, or even government programs.
Employer Contributions
Starting July 4, 2026:
- Employers can contribute up to $2,500 per year to a child’s TA.
- This money is tax-free for the employee.
- The $2,500 limit applies per employee, not per child. So if you have two kids, the total is still $2,500.
Cafeteria Plans
- Employers can offer TA contributions through cafeteria plans (benefit plans where employees choose options).
- Employees can use salary reductions to fund their child’s TA.
- Important: Employees cannot use salary reductions for their own TA—only for their child’s.
What Employers Need to Do
- Tell the TA trustee that the contribution is from a TACP (Trump Account Contribution Program).
- Make sure contributions don’t go over the $2,500 limit.
What’s Next?
The IRS will release more detailed rules soon about:
- How cafeteria plans and TACPs work together.
- Reporting requirements for employers.
Bottom Line:
Trump Accounts give families a new way to save for kids’ futures, and employers can help by contributing tax-free funds. Businesses should start planning now for the July 2026 rollout.
Source: Thompson Reuters
by admin | Dec 5, 2025 | Blog
The end of the year is almost here—can you believe it? Before you dive into holiday plans, take a quick peek at your Flexible Spending Account (FSA) or Health Savings Account (HSA). You might have money sitting there that could vanish if you don’t use it soon!
Why You Should Check
- FSA funds usually expire: Most FSAs follow the “use it or lose it” rule. If you don’t spend the money by December 31, it could go away. Some plans offer a grace period or a small rollover, but not all do.
- HSA funds roll over: HSAs are more forgiving, but it’s still smart to use what you can now—especially for tax savings and health needs.
What Can You Buy?
You’d be surprised at what counts! Eligible items include:
- Prescription meds and over-the-counter medicine
- Glasses, contacts, and eye exams
- Dental visits and orthodontics
- First-aid kits, sunscreen, and even period products
Top 5 FSA/HSA Buys
Here are some popular, eligible items to spend your funds on before the year ends:
- Sunscreen – Protect your skin year-round.
Shop Sunscreen at FSA Store
- Blood Pressure Monitor – Keep tabs on your health at home.
Shop BP Monitors at FSA Store
- First-Aid Kit – Be prepared for life’s little surprises.
Shop First Aid Kits at FSA Store
- Menstrual Care Products – Pads, tampons, and more are eligible.
Shop Menstrual Care at FSA Store
- Thermometers & Wellness Devices – Great for family health tracking.
Shop Thermometers at FSA Store
Quick Tip
Every plan is different, so log in to your account or call your benefits provider to confirm your deadline and what’s covered.
Don’t let your hard-earned dollars go to waste. Take five minutes today to check your balance and make the most of your benefits before the year ends!
Explore More Eligible Items at FSA Store by clicking here.
by admin | Oct 20, 2025 | Blog
New 2026 limit provides greater savings flexibility for working families
Effective January 2026, the annual contribution limit for Dependent Care FSAs will increase from $5,000 to $7,500 per household. For those married filing separately, the limit rises from $2,500 to $3,750. This is the first permanent increase since the benefit was established in 1986, intended to help working families manage rising childcare costs.
This change was introduced as part of the One Big Beautiful Bill Act, signed into law on July 4, 2025. The bill includes sweeping updates to employee benefits, aiming to provide greater financial flexibility for working families
A Dependent Care Flexible Spending Account (DCA or Dependent Care FSA) is a pre-tax benefit account that allows employees to set aside money to pay for eligible child or adult dependent care expenses. These can include daycare, preschool, before- and after-school programs, and elder care services—provided the care enables the employee (and spouse, if applicable) to work or look for work.
Key Considerations for Employers
- Plan updates required: Employers must revise Section 125 cafeteria plan documents to reflect the new limits.
- Nondiscrimination Testing still applies: Plans must pass IRS rules to ensure fairness across income levels.
- Clear communication is essential: Employees need to understand the new limits, deadlines, and use-it-or-lose-it rules.
- Employers should connect with their HRIS partners/vendors to update system configurations accordingly.
- Employers with non–calendar-year plans may adopt the higher limit effective January 1, 2026, provided their plan documents are amended accordingly. Employers must also ensure no employee exceeds the annual $7,500 contribution limit for the 2026 tax year.
Employers may adopt the increased limit with their next plan renewal. If adopted, be sure to update payroll systems, plan documents, and employee communications before the start of the plan year.
by admin | Oct 14, 2025 | Blog
The IRS announced the 2026 contribution limits for all Flexible Spending Account (FSA) plans. Below is an overview of the limit increases across all the types of FSAs.
Health Flexible Spending Account
The Health FSA, which provides employees the ability to set aside money on a pre-tax basis to pay for eligible medical, dental, and vision expenses will have an increase to its contribution maximum from $3,300 to $3,400 for 2026. The new contribution limit will also apply to the Limited Purpose FSA which reimburses eligible dental and vision expenses. Limited Purpose FSA limits will also increase from $3,300 to $3,400 for 2026.
Carryover Limit
The FSA Carryover limit provides employers the option to transfer a maximum amount of remaining FSA balances at a plan year’s end to carryover for use during the next plan year. This is available with Healthcare and Limited Purpose FSAs only. The carryover limits for this account will increase from $660 to $680 for 2026.
Dependent Care Flexible Spending Account
The Dependent Care FSA allows employees to set aside pre-tax dollars to pay for eligible dependent care expenses,
such as daycare, preschool, and before- or after-school programs. For 2026, the contribution limit will increase from
$5,000 to $7,500 for single taxpayers or married couples filing jointly. For married individuals filing separately, the limit
will increase from $2,500 to $3,750. This change was enacted through legislation passed in July 2025 and is not subject
to annual inflation adjustments.
Commuter Benefits
Commuter Benefits help employees pay for certain parking, mass transit, and/or vanpooling expenses with pre-tax dollars. The contribution limits for this account will increase from $325 to $340 for 2026.
Adoption Assistance
The Adoption Assistance FSA helps employees pay eligible adoption expenses such as agency fees and court costs by contributing to the account with pre-tax money from their paycheck. The contribution limits for this account will increase from $17,280 to $17,670 for 2026.
For more information about this major change, read our latest handout.
