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December 3, 2018

2019 Benefit Plan Limits (article)

The Internal Revenue Service released the 2019 inflationary (cost of living) adjustments relating to several types of benefits.  Below are select highlights of Revenue Procedure 2018-57 (also see related IRS News Release, IRS provides tax inflation adjustments for tax year 2019, Nov. 15, 2018).

Flexible Spending Account (FSA) Cap.  The amount that can be contributed to a health flexible spending account (FSA) through voluntary salary reductions for plan years beginning in 2019 will increase to $2,700, up from $2,650 in 2018.

Qualified Transportation Fringe BenefitsWith regard to transportation expenses reimbursed by an employer and excludable from the employee’s income under a qualified transportation program, the limits for 2019 slightly increase from 2018:

 

2019

2018

Commuter Highway Vehicle (van pooling) and any Transit Pass

$265

$260

Qualified Parking

$265

$260

 

As a reminder, the Tax Cuts and Jobs Act (TCJA) suspended the employer’s deductibility of qualified transportation expenses, effective January 1, 2018.  The tax exclusion available to employees remains applicable.  For tax-exempt entities, the unrelated business income tax is assessed on these amounts.

In addition, the TCJA suspended the qualified bicycle commuter benefit from December 31, 2017 through December 31, 2025.  An employer sponsoring a qualified bicycle fringe benefit plan can still take a tax deduction (up to $20 per month, or $240 annually) for reimbursing participating employees who use a bicycle for traveling between their home and place of employment.  However, these amounts can no longer be excluded from the employee’s income.

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 2019 and 2018:

 

2019

2018

Exclusion Limit

$14,080

$13,810

AGI Phase-out Limits

Between $211,160 and $251,160

Between $207,140 and $247,140

 

Health Savings Accounts.  The 2019 annual limits applicable to health savings accounts were released earlier this year (see HSA Inflationary Adjustments for 2019, Benefit Beat, 6/7/18).

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 2019 are slightly increased:

 

2019

2018

Single

Family

Single

Family

HDHP Annual Deductible

Between $2,350 and $3,500

Between $4,650 and $7,000

Between $2,300 and $3,450

Between $4,550 and $6,850

Out-of-Pocket Expenses

$4,650

$8,550

$4,550

$8,400

 

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

2019 Premium Limit

2018 Premium Limit

<40

$420

$420

>40 but <50

$790

$780

>50 but <60

$1,580

$1,560

>60 but <70

$4,220

$4,160

>70

$5,270

$5,200

 

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 $54,200 (indexed for 2019; the wage ceiling in 2018 is $53,200).  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 $27,100 in the 2019 tax year (the phase-out wage limit in 2018 is $26,600).   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.

QSEHRA Payments and Reimbursements. A qualified small employer health reimbursement arrangement, known as a “QSEHRA”, allows eligible small employers (those employing fewer than 50 employees and who do not offer health coverage) to reimburse health insurance premium for individual coverage purchased either through or outside the marketplace. Such arrangement must meet certain criteria, specifically, the QSEHRA:

  1. Must be funded solely by the eligible small employer; no salary reduction contributions can be made under this arrangement; and,
  2. Provides, following the employee’s proof of coverage, for the payment or reimbursement for medical care expenses, as defined in IRC Section 213(d)), including premium for health coverage through the individual market, incurred by the eligible employee or his/her family members. For 2018, the annual amount of payments and reimbursements is capped at $5,050 for employee-only, or $10,250 for arrangements that provide for payments or reimbursements for the employee’s family members.  Both of these limits are subject to inflationary adjustments. Accordingly, beginning in 2019, the total amount of payments and reimbursements is capped at $5,150 ($10,450 for family coverage).  As a reminder, the total amount of permitted benefits received under a QSEHRA must be reported in Box 12, using Code FF of the Form W-2.

Increase in Tax Information Reporting Penalties.  The IRS can assess penalties when certain tax information is not provided on a timely basis. Specifically, penalties may be assessed for failure to file information returns or provide payee statements, such as the Form W-2 and Form 1099, and notably, the Affordable Care Act’s Forms 1094 and 1095, or related payee statements.  Beginning in 2019, the total penalty cap will increase as follows:

  • The penalty for failure to file a correct information return remains at $270 for each return for which the failure occurs, with the total penalty cap of $3,339,000 for a calendar year.
  • The penalty for failure to provide a correct payee statement remains at $270 for each statement for which the failure occurs, with the total penalty cap of $3,339,000 for a calendar year.

Special rules apply that increase the per-statement and total penalties if there is intentional disregard of the requirement to file the returns and furnish the required statements.

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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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