The IRS recently released new inflation-adjusted amounts for 2014, establishing the tax-related salary deduction limits on a variety of employee benefits. These amounts are updated annually to reflect cost-of-living adjustments.
The tax items for tax year 2014 of greatest interest to health and welfare plan sponsors include the following dollar amounts:
FSAs. The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending arrangements (FSA) remains unchanged at $2,500. 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.
Transportation limit changes. The 2014 monthly limit on the amount that may be excluded from an employee’s income for qualified parking benefits is $250 per month (up from $245). The combined monthly limit for transit passes and vanpooling (commuter highway) expenses falls to $130 (from $245) due to the expiration of the temporary “rule of parity” that made it equal to the parking limit (this rule could still be extended).
Adoption credit. The maximum that can be excluded from an employee’s income under an employer-provided adoption assistance program rises to $13,190 (from $12,970). The credit begins to phase out for taxpayers with modified adjusted gross income in excess of$197,880 and is completely phased out for taxpayers with modified adjusted gross income of $237,880 or more.
Long-term care. The amount of long-term care per diem payments that is excludable from income increases to $330 per day (up from $320). The limitations regarding eligible long- term care premiums includible in the term “medical care” are $370 (attained age of 40 or less before close of tax year), $700 (41-50), $1,400 (51-60), $3,720 (61-70) and $4,660 (over 70).
Archer MSA limits rise. 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 $2,200 and not more than $3,250, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $4,350. For family coverage, the term means a health plan that has an annual deductible that is not less than $4,350 and not more than $6,550, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $8,000.
Small Business Tax Credit rises. 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 $25,400 for tax year 2014, up from $25,000 for 2013. And the maximum limit, at which the credit completely phases out, rises to $50,800 (from$50,000).
HSAs/HDHPS. Several months ago, the IRS released the 2014 cost-of-living adjustments affecting HSAs and HDHPs.
HSA Contribution Limits. The 2014 annual HSA contribution limit for individuals with self-only HDHP coverage is $3,300 (a $50 increase from 2013), and the limit for individuals with family HDHP coverage is $6,550 (a $100 increase from 2013).
HDHP Minimum Required Deductibles. The 2014 minimum annual deductible for self-only HDHP coverage is $1,250 and the minimum annual deductible for family HDHP coverage is $2,500. Both are unchanged from 2013.
HDHP Out-of-Pocket Maximums. The 2014 maximum limit on out-of-pocket expenses (including items such as deductibles, co-payments, and co-insurance, but not premiums) for self-only HDHP coverage is $6,350 (a $100 increase from 2013), and the limit for family HDHP coverage is $12,700 (a $200 increase from 2013).
Please contact your Conner Strong & Buckelew account representative toll free at 1-877-861-3220 with any questions. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.