The IRS just released the 2017 Cost-Of-Living Adjustments (COLAs) for a slew tax-related employee benefits. Here’s what employers need to know about the new COLA limits:
(These changes were outlined in IRS Rev. Procedure 2016-55).
What’s going up
- FSAs get a bump. The annual employee salary contribution limit to health flexible spending accounts (FSAs) will increase to $2,600 (a $50 increase from 2016).
- Adoption limit, credit rises. The maximum that can be excluded from an employee’s income under an employer-provided adoption assistance program rises to $13,570 (a $110 increase from the 2016 max). On top of this, the maximum adoption credit allowed to an individual for the adoption of a child will be $13,570 for 2017 (also a $110 increase from 2016). Both the exclusion and the credit will begin to be phased out for individuals with modified adjusted gross incomes greater than $203,540 and will be entirely phased out for individuals with modified adjusted gross incomes of $243,540 or more (these income levels are $1,620 higher than for 2016).
- Wage limit for health reform Small Business Tax Credit rises. The average annual wage limit, at which the ACA’s Small Business Tax Credit begins to phase out for eligible small employers, rises to $26,200 (up $300 from last year). And the maximum limit, at which the credit completely phases out, rises to $52,400 (up $600).
- Some Archer MSA limits get a bump. For Archer Medical Savings Accounts (MSAs) used with high-deductible health plans, the annual deductible for self-only coverage must not be less than $2,250 (unchanged from 2016) or more than $3,350 (also unchanged). The limit on out-of-pocket maximums for self-only coverage, however, climbs to $4,500 (up $50.) For family coverage, the minimum deductible must not be less than $4,500 (up $50 from 2016) or more than $6,750 (up $50). The limit on out-of-pocket maximums for family coverage climbs to $8,250 (up $100).
What stays the same
- Qualified transportation limits stand pat. The 2017 monthly limit on the amount that may be excluded from an employee’s income for qualified parking benefits stays at $255 per month (unchanged from $2016). The combined monthly limit for transit passes and vanpooling expenses also remains unchanged at $255.
- Premium Tax Credit. For taxable years beginning in 2017, the following limitations on the tax for excess advance credit payments will apply: For unmarried individuals (other than surviving spouses and heads of household), $300 for household income less than 200% of the federal poverty line (FPL); $750 for household income at least 200% but less than 300% of FPL; and $1,275 for household income at least 300% but less than 400% of FPL (no changes from 2016). For all other taxpayers, the amounts are $600 for household income less than 200% of FPL; $1,500 for household income at least 200% but less than 300% of FPL; and $2,550 for household income at least 300% but less than 400% of FPL (also no changes from 2016).