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November 5, 2013

2014 Benefit Plan Limits and 2014 Social Security COLAs

In Revenue Procedure Revenue Procedure 2013-35, the IRS released 2014 tax adjustments relating to several types of benefits. 

Small Business Tax Credit.  Beginning in 2014, following are changes applicable to the small business tax credit (SBTC):

  1. 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 $25,400 for the 2014 tax year (the phase-out wage limit for 2013 was $25,000).
  2. The maximum average annual wage limit to qualify for the SBTC as an eligible small employer for 2014 is $50,800 (previously $50,000 in 2013). 
  3. The maximum credit increases to 50% of premiums paid by small business employer (35% for small tax-exempt employers). 
  4. Only QHP coverage purchased through the SHOP is available for the SBTC, and only for a 2-consecutive year period.

FSA Cap.  The Affordable Care Act limits, to $2,500, the amount that can be contributed to a health flexible spending account (FSA) through voluntary salary reductions in 2013. This limit is subject to inflation adjustments; however, for 2014, the $2,500 limit remains unchanged.

Qualified Transportation Fringe Benefits.  The transportation expenses reimbursed by an employer, and excludable from the employee’s income, under a qualified transportation program per month are:

 

2013

2014

Commuter Highway Vehicle (van pooling) and Any Transit Pass

$245

$130*

Qualified Parking

$245

$250

*The decrease in the van pooling and transit pass limit in 2014 is due to a temporary parity provision of the American Taxpayer Relief Act of 2012 that matched these expenses with the qualified parking limit.  This provision expires on December 31, 2013 unless Congress enacts legislation to extend the parity provision in 2014.

Qualified Bicycle Fringe Benefit.  It should be noted that the qualified bicycle fringe benefit limit is not indexed or tied to a cost of living adjustment.  Therefore, 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.

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 2013 and 2014:

 

2013

2014

Exclusion Limit

$12,970

$13,190

AGI Phase-out Limits

Between $194,580 and $234,580

Between $197,880 and $237,880

Health Savings Accounts.  Please note that the 2014 annual limits applicable to health savings accounts were released earlier this year (see Health Savings Accounts:  2014 Cost of Living Adjustments, Benefit Beat, 5/6/13). 

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 2014 are: 

 

2013

2014

Single

Family

Single

Family

HDHP Annual Deductible

Between $2,150 and $3,200

Between $4,300 and $6,450

Between $2,200 and $3,250

Between $4,350 and $6,550

Out-of-Pocket Expenses

$4,300

$7,850

$4,350

$8,000

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

2013 Premium Limit

2014 Premium Limit

<40

$360

$370

>40 but <50

$680

$700

>50 but <60

$1,360

$1,400

>60 but <70

$3,640

$3,720

>70

$4,550

$4,660

2014 Social Security Cost-of-living Adjustment

The 2014 cost of living adjustment to the Social Security wage base is increased from $113,700 to $117,000.  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 wage 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 Bulletins, Additional Medicare Tax - Clarifications and Proposed Regulations Issued  and 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.  The tax rates shown above do not include the 0.9%.

Additional adjustments are included in the Fact Sheet: 2014 Social Security Cost-of-Living Adjustments.

2014 Medicare Parts A and B: Premium and Deductible Rates

The Centers for Medicare and Medicaid Services has released the applicable Medicare Part A and Part B premium and deductible rates for 2014. 

2014

Part A

 

Premium

  • No monthly Part A premium for those with 40+ quarters of Medicare-covered employment.
  • $234 per month for those having 30-39 quarters of Medicare-covered employment.
  • $426 per month for people who are not otherwise eligible for premium-free hospital insurance and <30 quarters of Medicare-covered employment.

Deductible

  • $1,216 for first 60 days of inpatient care;
  • Additional $304 per day for days 61 through 90;
  • Additional $608 per day beyond the 90th day.

Part B Premium and Deductible

The standard Medicare Part B monthly premium ($104.90) the Part B deductible ($147) for 2014 remains unchanged from 2013. 

Sources:

 

 

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