The IRS has released 2016 inflation-adjusted amounts for various benefits. Issued under Revenue Procedure 2015-53, the changes reflect annual cost-of-living adjustments and affect several benefits typically offered under employer-sponsored arrangements. This update summarizes key changes that may impact employer-sponsored health and welfare plans.
FSAs. The 2016 annual plan year dollar limit on employee contributions to employersponsored healthcare flexible spending arrangements (FSAs) is $2,550, unchanged from 2015. The limit for a dependent care FSA will remain $5,000 for an individual or married couple filing a joint tax return, or $2,500 per person for those married and filing separately.
Qualified Transportation Benefits. The monthly limit on the amount that may be excluded from an employee’s income for qualified parking benefits has increased to $255 per month (up from $250) for 2016. The combined monthly limit for transit passes and vanpooling (commuter highway) for 2016 remains at $130.
Adoption Assistance Credit. The maximum that can be excluded from an employee’s income under an employer-provided adoption assistance program rises to $13,460 for 2016 (from $13,400). The credit begins to phase out for taxpayers with modified adjusted gross income in excess of $201,920 (from $201,010 in 2015) and is completely phased out for taxpayers with modified adjusted gross income of $241,920 (from $241,010 in 2015) or more.
Long-term Care. The limitations regarding eligible long-term care premiums includible in the term “medical care” increased from 2015. The 2016 amounts are $390 (attained age of 40 or less before close of tax year), $730 (41-50), $1,460 (51-60), $3,900 (61-70) and $4,870 (over 70).
Archer MSA. For Archer Medical Savings Accounts (MSAs), the term “high deductible health plan” means, for self-only coverage, a health plan that has an annual deductible that is not less than $2,250 (up from $2,200 in 2015) and not more than $3,350 (unchanged from 2015), and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $4,450 (same as 2015). For family coverage, the term “high deductible health plan” means, a health plan that has an annual deductible that is not less than $4,450 (unchanged from 2015) and not more than $6,700 (up from $6,650), and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $8,150 (unchanged from 2015).
Small Business Tax Credit. The Patient Protection and Affordable Care Act’s Small Business Tax Credit provides that the maximum credit is phased out based on the employer’s number of full-time equivalent employees in excess of 10 and the employer’s average annual wages in excess of $25,900 for tax year 2016, up from $25,800 in 2015.
HSAs/HDHPs. The IRS released 2016 limits for contributions to health savings accounts (HSAs) for high deductible health plans (HDHPs) earlier this year. Please see our Update for more information on the 2016 HSA and HDHP limits.
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