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As we get ready for the holidays and 2016 comes to a close, 2017 will bring more than a New Year - there are also new benefit maximums that may impact you and your employees.
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| 2017 Benefit Limits |
FSA - Dependent Care: $5,000
FSA - Medical Spending: $2,600
Transportation: $255 monthly
Parking: $255 monthly
Adoption Assistance: $13,570
Educational Assistance: $5,250
Catch-Up Contributions: $6,000
401(k) Contribution Limits: $18,000
Please read below for more detailed descriptions.
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| FSA |
Health Care - FSA
Although, not all plans are calendar year plans, now might be a good time to remind Health Care FSA participants about the other covered Flex expenses - like SPF 30 and hearing aid batteries - that they can take advantage of.
The FSA Store has a great website that lists - alphabetically a myriad of covered expenses and
explains how/when some may or may not be covered: FSA Store
Dependent Care - FSA
Sponsors of dependent care assistance plans are required to notify plan participants of the total tax-free benefit they received through the plan during the calendar year by January 31st of the following year.
The total benefit received by an individual must also be reported on the individual's W-2 form. Most plan sponsors use the W-2 form to satisfy the notification. With some limitations, $5,000 is the maximum tax-free dependent care benefit an individual may receive.
Dependent care assistance plans must satisfy certain nondiscrimination requirements. These include the following:
- Five percent shareholders or owners cannot receive more than 25% of the total plan benefits.
- Average non-highly compensated benefits must equal at least 55% of average highly compensated benefits.
Domestic Partner Coverage
Federal and many state laws do not recognize domestic partners for Section 125 tax purposes unless they qualify as legal dependents or legal spouses. The "fair market value" of the coverage provided by the health plan to a non-dependent domestic partner, over the amount paid by the employee-participant for such coverage in the income of the participant wages for FICA, FUTA and income tax withholding purposes.
Section 125 flexible benefits and spending accounts may not be provided to domestic partners, and employers are not required to offer COBRA to domestic partners.
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| Transportation & Parking |
The monthly amount that can be excluded from income for qualified parking expenses is $255.
The aggregate monthly limit for transit passes and/or transportation in a commuter highway vehicle (e.g., van pooling) is $255.
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| Adoption Tax Credits |
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The maximum amounts that can be excluded from an employee's gross income for qualified adoption assistance expenses, and for expenses related to adoption of a child, are $13,570 per child.
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| Educational Assistance |
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Employer-paid educational assistance is deductible by the employer and excluded from the income and wages of the employee under IRS Section 127. The maximum exclusion amount is $5,250.
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| HSA & Catch-Up Contributions |
Health Savings Accounts (HSAs) are available for individuals who participate in qualified high-deductible health plans (HDHPs).
For 2017, the Annual Contribution limits for single/family:
$3,400/$6,750.
The "catch-up" contribution that can be made by individuals age 55 or older remained at $1,000.
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| 401K Annual Notices |
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QDIA Notice
Does your plan have an automatic enrollment feature? If yes, you must provide employees with a QDIA notice, (Qualified Default Investment Alternative). This should be provided to newly eligible employees and annually to all employees at the time of (or prior to) their initial eligibility date or the beginning of the plan year.
Annual Participant Fee Disclosure
P
lan Administrators must provide participants with plan and investment information, including details about fees and expenses, comparative charts, and access to a glossary of relevant terms.
Safe Harbor Notice
The IRS requires that safe harbor 401(k) plans, prior to the beginning of each plan year. The notice provides eligible employees with a notice that discloses all relevant details of the safe harbor match or non-elective contribution. The purpose of this notice is to inform the employees of the matching or non-elective contribution.
The safe harbor notice must be provided to eligible employees no later than 30 days prior to the start of the plan year, but no more than 90 days.
Automatic Enrollment
If the plan uses an eligible automatic contribution arrangement or a qualified automatic contribution arrangement, the employer must notify all employees who are eligible to participate in the arrangement between 30 and 90 days prior to the beginning of each plan year.
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401(k) Distributions to Terminated Participants with less than $1,000
Keep record-storing costs (per participant charges) to a minimum by paying out terminated participants who have vested account balances of less than $1,000. Paying participants before a December 31st year end will reduce the number of records you must maintain and may even eliminate the need for a plan audit. Payout is subject to the terms of the plan.
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| Group Term-Life Imputed Income |
Imputed Income is still with us and the limit on non-taxable, group term basic life insurance remains at $50,000. The value of the amount over $50,000 must be added to the individual's taxable income.
Plan sponsors need to determine the amount of imputed income, (see Table I rates below), for group term life plan participants and report this information to the payroll administrator to ensure that the imputed income amount is reported on employees' W-2 forms which are due by January 31st.
Plan sponsors can also include the imputed income in the employees' last paychecks of the year as the imputed income is also subject to Social Security taxes. Including the imputed income in the last paychecks permits the necessary Social Security tax withholding.
IRS Uniform Premium Table 1 Rates
Age IRS Monthly Value Per $1,000 of group term life insurance coverage
<25 Years $0.05
25 - 29 $0.06
30-34 $0.08
35-39 $0.09
40-44 $0.10
45-49 $0.15
50-54 $0.23
55-59 $0.43
60-64 $0.66
65-69 $1.27
70 and Over $2.06
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For more information visit our website at:
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This update is a publication of TBR Associates, designed to highlight employee benefit matters of interest to our readers. The information contained in this publication is meant for general educational purposes only.
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