Federal agencies have made a number of announcements recently regarding cost-of-living adjustments for 2017. IRS Revenue Procedure 2016-55 alone covered over 50 different items.
The salary reduction contribution limit for health flexible spending accounts (FSAs) will increase from $2,550 to $2,600.
The maximum out-of-pocket (OOP) limit for non-grandfathered plans is increasing from $6,850 to $7,150 for an individual and from $13,700 to $14,300 for a family. Starting in 2016, all non-grandfathered plans must have an individual limit, even if there is family coverage.
The monthly limit for qualified commuter parking and mass transit passes remains $255.
The maximum amount that can be excluded from an employee’s income for adoption assistance (either employer-provided or through an FSA) is increasing from $13,460 to $13,570. The amount excludable from an employee’s gross income begins to phase out for taxpayers with modified adjusted gross income (MAGI) in excess of $203,540 (up from $201,920) and is completely phased out for taxpayers with MAGI of $243,540 or more (up from $241,920).
The maximum average annual wages of employees used for determining who is eligible for the maximum amount of the small employer tax credit will be $26,200, up from $25,900. If the average wages are higher than this amount, the tax credit phases out and the limit is twice this amount to be eligible to receive any small employer tax credit.
The threshold for determining who is a highly compensated employee for purposes of cafeteria plan nondiscrimination testing remains $120,000. The threshold for determining whether an officer is a key employee for purposes of cafeteria plan nondiscrimination testing will increase to $175,000, up from $170,000.
The penalty for individuals who do not have minimum essential coverage will continue to be the greater of $695 or 2.5 percent of the excess of the taxpayer’s household income over the minimum filing requirement.
Detailed limits applicable to long-term care insurance were also announced.
The penalties for failing to file correct payee statements, such as W-2s and 1095-Cs remain unchanged; however, the maximum annual penalties have increased. The penalty per return is generally $260; however, lesser penalties can apply in the return is provided within 30 days of the due date ($50 per return) or by August 1 ($100 per return). Since the 1095-C must be provided to both the employee and the IRS, the effective penalty is $520 per return.
The Social Security wage base is increasing from $118,500 to $127,200.
Although new Archer Medical Savings Accounts (MSAs) have not been allowed for many years, existing ones are allowed to continue. The maximum contributions to an existing Archer MSA are 65 percent of the deductible for self-only coverage and 75 percent of the deductible for family coverage. MSA contributions must be coordinated with any HSA contributions and cannot exceed the applicable HSA maximum. The minimum and maximum deductible amounts for MSA-compatible HDHPs remain unchanged with ranges of $2,250 to $3,350 for self-only coverage. The range for family coverage increases to $4,500 to $6,750, up from $4,450 to $6,700. The OOP limit for MSA-compatible HDHPs increases from $4,450 to $4,500 for self-only coverage and $8,150 to $8,250 for family coverage.
As a reminder, earlier this year the Internal Revenue Service announced that the annual contribution limit to Health Savings Accounts (HSAs) for people with self-only coverage under a High Deductible Health Plan (HDHP) would increase from $3,350 to $3,400. Other HSA and HDHP limits remain unchanged. The maximum contribution for people with family coverage is $6,750. The minimum deductibles are $1,300 for self-only coverage and $2,600 for family coverage. The maximum OOP limits are $6,550 for self-only coverage and $13,100 for family coverage.
Another announcement made earlier this year was about affordability. For 2017, employers can require employees to pay up to 9.69 percent of pay and still be considered affordable (up from 9.66 percent for 2016).