IRS Issues 2019 Cost-of-Living Adjustments for Inflation
On Nov. 15, 2018, the IRS issued Revenue Procedure 2018-57, which relates to certain cost-of-living adjustments for a wide variety of tax-related items, including transportation benefits, qualified parking benefits, health FSAs, QSEHRAs and other limitations for tax year 2019.
According to the revenue procedure, the annual limit on employee contributions to a health FSA will be $2,700 for plan years beginning in 2019 (up $50 from 2018).
Some changes impact the small business health care tax credit, since the maximum credit is phased out based on the employer’s number of full-time equivalent employees in excess of 10. For 2019, the average annual wage level at which the credit phases out for small employers is $27,100 (up $400 from 2018).
One option for certain small employers is the Qualified Small Employer HRA (QSEHRA). For 2019, the maximum amount of reimbursements under a QSEHRA may not exceed $5,150 for self-only coverage and $10,450 for family coverage (an increase from $5,050 and $10,250 in 2018).
Another change is that the maximum amount an employee may exclude from his or her gross income under an employer-provided adoption assistance program for the adoption of a child will be $14,080 for 2019 (a $240 increase from the 2018 maximum of $13,840).
Regarding qualified transportation fringe benefits, the monthly limit on the amount that may be excluded from an employee’s income for qualified parking benefits increases to $265 in 2019 (from $260 in 2018). The combined monthly limit for transit passes and vanpooling expenses also increases to $265 in 2019 (up from $260 in 2018).
Sponsors and administrators of benefits with limits that are changing (adoption assistance plans, health FSA, transportation fringe benefits) will need to determine whether their plans automatically apply the latest limits or must be amended (if desired) to recognize the changes. Any changes in limits should also be communicated to employees.
Please ask your advisor for a copy of the Employee Benefits Annual Limits white paper to reflect 2019 changes.