November 17, 2015

2016 Benefit Plan Limits (article)

In Revenue Procedure 2015-53, the IRS released 2016 inflationary or cost of living adjustments relating to several types of benefits, as follows. 

Small Business Tax Credit (SBTC)

Small businesses and tax-exempt employers who provide health care coverage to their employees under a qualified health care arrangement are entitled to a tax credit, as established by the Affordable Care Act.  To be eligible for the small business tax credit, the employer must employ fewer than 25 full-time equivalent employees whose average annual wages are less than $50,800 (indexed for 2015). The tax credit phases out for eligible small employers when the number of its full-time employees (FTEs) exceeds 10; or, when the average annual wages for the FTEs exceeds $25,900 in the 2016 tax year (the phase-out wage limit for 2015 was $25,800). As a reminder, only qualified health plan coverage purchased through a SHOP marketplace is available for the tax credit, and only for a 2-consecutive year period.


FSA Cap.  The amount that can be contributed to a health flexible spending account (FSA) through voluntary salary reductions in 2016 is unchanged from 2015 and remains at $2,550.


Qualified Transportation Fringe Benefits.  With regard to transportation expenses reimbursed by an employer and excludable from the employee’s income under a qualified transportation program, there is a slight increase in the amount for qualified parking in 2016:





Commuter Highway Vehicle (van pooling) and

Any Transit Pass



Qualified Parking




As a reminder, employees who use their bicycles for traveling between home and their place of employment are entitled to receive a reimbursement of up to $20 per month ($240 annually) for qualified bicycle expenses. This limit is not indexed nor tied to a cost of living adjustment.


Qualified Adoption Assistance Reimbursement Program (IRC §137).  An employer-provided adoption assistance program that meets the qualifications of IRC §137, allows participants to recover expenses relating to adoption, such as reasonable adoption fees, court costs, attorney’s fees and traveling expenses.  Below are the exclusion limits and AGI phase-out limits for 2015 and 2016:





Exclusion Limit



AGI Phase-out Limits

Between $201,010 and $241,040

Between $201,920 and $241,920


Health Savings Accounts.  Please note that the 2016 annual limits applicable to health savings accounts were released earlier this year (see Health Savings Accounts – 2016 Cost of Living Adjustments, Benefit Beat, 5/12/15).

Archer Medical Savings Accounts.  The Archer MSA pilot project ended on December 31, 2007; therefore, no new MSAs could be established after that date.  For existing MSAs, the annual deductible limits of a high deductible health plan used in conjunction with an Archer medical savings account for 2016 are slightly increased:








HDHP Annual Deductible


Between $2,200 and $3,300

Between $4,450 and $6,650

Between $2,250 and $3,350

Between $4,450 and $6,700

Out-of-Pocket Expenses





Long-Term Care Premiums.  The IRS limitations relating to eligible long-term care premiums includible as medical care, as defined by IRC §213(d) are:

Age at end of tax year

2015 Premium Limit

2016 Premium Limit




>40 but <50



>50 but <60



>60 but <70






Premium Tax Credit for Coverage under a Qualified Health Plan.  Individuals who buy coverage through the marketplace and meet certain income criteria may be eligible for an advance credit payment wherein a portion of the premium is made directly to the insurer to cover the cost of coverage.  The amount of an individual’s premium tax credit is reduced by the amount of any advance credit payments made during the year.  If the advance credit payment for a taxable year exceeds the premium tax credit limit, the individual would owe the excess as additional tax, subject to certain inflationary limits.  For tax years beginning in 2016, the limitation on tax imposed for excess advance credit payments is determined using the following table:


Household Income

(as percent of poverty line)

Limitation amount for unmarried individuals

(other than surviving spouse and head of household)

Limitation amount for all other taxpayers

Under 200%



Between 200% and 300%



Between 300% and 400%




The information contained in this article is provided as general guidance and may be affected by changes in law or regulation. This article is not intended to replace or substitute for accounting or other professional advice. Please consult a CBIZ professional. This information is provided as-is with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.

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