November 6, 2008

2009 Cost of Living Adjustments Applicable to Various IRS Benefits, Social Security, and Medicare

In Revenue Procedure 2008-66, the IRS released several cost of living adjustments for various benefits.  Following are amounts applicable to tax years beginning in 2009.

Please note that the 2009 annual limits applicable to health savings accounts were released earlier this year (seeHSA Limits for 2009 from the May 2008 Benefit Beat).

Archer Medical Savings Accounts

The annual deductible limit of a HDHP and out-of-pocket expense limit in an Archer medical savings account for 2009 are:








HDHP Annual Deductible

Between $1,950 and $2,900

Between $3,850 and $5,800

Between $2,000 and $3,000

Between $4,000 and $6,060

Out-of-Pocket Expenses





Transportation Benefits

Transportation expenses reimbursed by an employer under a qualified transportation program (IRC §132(f)) are:




Commuter Highway Vehicle and Any Transit Pass



Qualified Parking



New Qualified Bicycle Fringe Benefit.  The recently enacted Emergency Economic Stabilization Act of 2008 (H.R. 1424) provides for a new type of qualified transportation benefit in the form of reimbursement for use of a bicycle.  Beginning January 1, 2009, employees who regularly use their bicycles for a substantial portion of travel between home and place of employment are eligible to receive reimbursement of up to $20 per month ($240 annually) for qualified bicycle expenses.  Such qualified expenses include the purchase of the bicycle, plus improvements, repair, and storage costs. 

Long-Term Care Premiums

The IRS limitations relating to eligible long-term care premiums includible as medical care, as defined in IRC §213(d).

Age at end of tax year

2008 Premium Limit

2009 Premium Limit


$ 310


>40 but <50

$ 580


>50 but <60

$ 1,150


>60 but <70

$ 3,080



$ 3,850


Adoption Assistance Programs 

For purposes of adoption assistance programs (IRC §137), the exclusion limit and AGI phase-out limits for 2009 are:




Exclusion Limit



AGI Phase-out Limits

Between $174,730 and $214,730

Between $182,180 and $222,180

2009 Social Security COLAs

For 2009, the Social Security wage base will be $106,800, up from $102,000 in 2008.  The Medicare tax is generally assessed on all wages.  The combined tax rate remains at 7.65% (the Social Security portion is 6.2% on wages up to the applicable maximum taxable amount; the Medicare portion is 1.45% on all wages). SSA Fact Sheet of 2009 Social Security Cost-of-Living Adjustments.

2009 Medicare Premium and Deductible Rates


Part A

Part B


  • No monthly Part A premium for those with 40+ quarters of Medicare-covered employment.
  • $244.00 per month for those having 30-39 quarters of Medicare-covered employment.
  • $443.00 per month for people who are not otherwise eligible for premium-free hospital insurance and <30 quarters of Medicare-covered employment.





News Release: CMS Announces Medicare Premium and Deductible Rates for 2009


The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations.

As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this Benefit Beat is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.


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