The IRS has announced adjusted and confirmed annual limits for 2016.
Health flexible spending accounts (FSAs) will now have a plan year limit of $2,550. This remains the same as it was in 2015. Employers can opt to limit the maximum contribution to less than the statutory maximum. Money contributed by employers to Health FSAs does not count towards this maximum amount – however, plan sponsors should be aware that employer contributions could cause the FSA to lose its exempted status from Affordable Care Act (ACA) health plan reforms, which would cause significant additional requirements to be added to the FSA.
The IRS announcement also confirms that transit benefits will have a minimal change in 2016: $255 per month maximum for parking (up $5 from 2015) and $130 per month maximum for transit/ vanpooling expenses (same as 2015). Congress has a history of changing the transit reimbursement amounts at the very end of the plan year, however employers are not advised to count on these last-second changes occurring every year.
Adoption Assistance Program
The maximum for employer provided adoption assistance exclusion has increased from $13,400 to $13,460.
Small Business Health Care Tax Credit
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. This is up from the $25,800 in 2015.
Additional Regulatory Updates for October 2015
Historically, Form 5500s have been due within 7 months after the end of a plan year with the option to file for a 2.5 month extension. For tax years starting after December 31, 2015, Form 5500s will still be due within 7 months after the end of a plan year, however, there will now be an option to file for a 3.5 month extension as opposed to the former 2.5 month extension.
While Employers should continue to try to get Form 5500s filed in a timely manner, this change allows for an additional month, if needed, to file.
PACE Act FAQ
CMS put out an FAQ regarding the passing of the PACE Act, which redefined small group under the ACA as meaning 1-50 employees. This FAQ indicates that states are required to let notify CMS by October 30, 2015 if they still intend to raise the definition of a small group to mean 1-100 starting January 1, 2016. States are starting to respond to the PACE Act, and initial indications are that most are staying with the 1-50 definition. The government will have to make further adjustments to healthcare.gov and the federal SHOP Exchange for small groups as states change their definitions as well. Given the late timing of the PACE Act, these changes will likely not all occur by the end of 2015.
As a change to submitting transitional reinsurance payments for 2015, self-funded group health plans will no longer need to submit supporting documentation unless they are reporting for four or more contributing entities.
Legal Definition of “Spouse”
On October 21, 2015, the IRS released proposed regulations clarifying that the use of “husband” and “wife” throughout federal regulations applies to spouses in a same sex marriage. The proposed regulations would amend all federal regulations to have the terms “husband”, “wife”, and “spouse” all refer to any individual who is lawfully married to any other individual, regardless of gender.
These proposed regulations were expected following the Supreme Court decision in the case of Obergefell v. Hodges earlier this year.
We will continue to keep you up to date on new information regarding your health and welfare benefits. Please contact your Assurance representative with any questions.
Congress and the regulatory agencies of the federal government continue to tweak their rules and regulations. The Obama administration is entering its last full year in power and is focused on wrapping up any loose ends with respect to the ACA and other related rules and regulations. Employers can continue to expect tweaks to the rules as 2016 approaches. Assurance will keep our clients advised and as always, please contact us with any questions