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October 30, 2012

2013 limits applicable to MSAs and LTC premium; 2013 Social Security COLAs

In Revenue Procedure 2012-41, the IRS released 2013 tax adjustments relating to medical savings accounts and long term care premium.  It should be noted that this pronouncement does not include 2013 tax adjustments applicable to Adoption Assistance Programs or Qualified Transportation Expenses.  According to the IRS release, these items will be addressed in future guidance. 

Please note that the 2013 annual limits applicable to health savings accounts were released earlier this year (see Health Savings Accounts:  2013 Cost of Living Adjustments, Benefit Beat, 5/14/12).

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 limit of a HDHP and out-of-pocket expense limit in an Archer medical savings account for 2013 are:

 

2012

2013

Single

Family

Single

Family

HDHP Annual Deductible

Between $2,100 and $3,150

Between $4,200 and $6,300

Between $2,150 and $3,200

Between $4,300 and $6,450

Out-of-Pocket Expenses

 $4,200

 $7,650

 $4,300

 $7,850

Long-Term Care Premiums

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

Age at end of tax year

2012 Premium Limit

2013 Premium Limit

<40

$ 350

$360

>40 but <50

$ 660

$680

>50 but <60

$ 1,310

$1,360

>60 but <70

$ 3,500

$3,640

>70

$ 4,370

$4,550

2013 Social Security Cost-of-living Adjustment

The 2013 cost of living adjustment to the Social Security wage base is increased from $110,100 to $113,700.  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. 

With regard to the Medicare tax amount, as a reminder, the Affordable Care Act imposes an additional 0.9% Medicare tax increase on certain high earners beginning January 1, 2013 (see CBIZ Health Reform Bulletin, Implementation Guidance on Medicare Tax).  This additional Medicare tax increase does not apply to the employer’s share of the Medicare tax.  Employers must begin withholding the additional Medicare tax only when the individual has reached the $200,000 threshold.

Additional adjustments are included in the Social Security Fact Sheet of 2013 Social Security Cost-of-Living Adjustments.

 

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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