The IRS has released their adjusted contribution limits for HSAs. Those with an HSA-eligible high-deductible health plan will be able to provide additional money into their HSA in 2020.
PCORI Fees, imposed by the Affordable Care Act to employers who provide health insurance to their employees, are due Tuesday to the IRS. The fee is the amount of money paid by employers who provide health insurance to their employees and imposed by the ACA to fund the Patient-Centered Outcomes Research Institute (PCORI).
The fee is required to be reported only once a year on the second quarter Form 720 and is based on the average number of lives covered under the policy or plan.
For most 2017 plans, the PCORI fee is set at $2.26 per covered life per year. The PCORI fee will be indexed yearly to national health expenditures until it ends in 2019.
For plan years ending from October 1, 2017 through December 31, 2017, the PCORI fee is $2.39 per covered life, with the fee due on July 31, 2018.
For plan years ending from January 1, 2018 through September 30, 2018, the PCORI fee is $2.39 per life, with the fee due on July 31, 2019.
Please refer to the following chart for the filing due date and applicable rate depending upon the month a specified health insurance policy or an applicable self-insured health plan ends.
Have questions regarding the PCORI fee for 2018? Contact a Plexus client service team representative in Deer Park, Ill. (847-307-6100), Chicago (312-606-4800), Dallas (972-770-5010) or Oklahoma City (405-840-3033).
We’re here to help – and we’re happy to help.
The Plexus Groupe explains new fringe benefits tax law changes in the Tax Cuts and Job Act released by the IRS for employers. The Internal Revenue Service (IRS) recently released the 2018 version of Publication 15-B, Employer’s Tax Guide to Fringe Benefits. This contains information for employers on the tax treatment of fringe benefits.
The new fringe benefits tax law, released in 2018, incorporates the new Tax Cuts and Jobs Act to the following fringe benefits:
→ Qualified transportation plans.
→ Moving expense reimbursements.
→ Employer-provided meals.
→ Employee achievement awards.
IRS Publication 15-B also discusses the new fringe benefits tax law for a variety of other benefits and includes key benefit limits for 2018.
Fringe Benefits: Tax Rules
A fringe benefit is a form of additional pay for an employee’s performance of services. Fringe benefits may include, for example, employer-provided cars, discounts on property or services, memberships in country clubs or other social clubs, and tickets to entertainment or sporting events. Fringe benefits are generally included in an employee’s gross income, unless a specific tax exclusion applies.
The Internal Revenue Code includes tax exclusion rules for certain types of fringe benefits. These include transportation benefits, meals, achievement awards, educational assistance and dependent care assistance. The new fringe benefits tax law excludes all or part of the value of certain fringe benefits from employees’ pay. In most cases, the excluded benefits are not subject to federal income or employment tax withholding, and are not reported on IRS Form W-2.
IRS Publication 15-B: An Overview
IRS Publication 15-B contains information for employers on the tax treatment of certain kinds of fringe benefits. The IRS updates Publication 15-B each year for tax law changes. The 2018 version of Publication 15-B is significant because it includes changes made by the new tax law.
Key provisions of Publication 15-B include the following:
Qualified Transportation Benefits
The new fringe benefits tax law, effective for 2018, does not allow employer deduction for qualified transportation benefits. IRS Publication 15-B clarifies that when an employer directly pays for qualified transportation benefits, through a bona fide reimbursement arrangement or through a compensation reduction agreement, their is no employer deduction. Thus, employers cannot deduct the wages that employees choose to contribute on a pre-tax basis for qualified transportation benefits.
IRS Publication 15-B does not address the unrelated business income tax (UBIT) issue for tax-exempt employers that provide transportation benefits.
While employers may no longer deduct payments for qualified transportation benefits, the fringe benefit exclusion rules still apply and employee wages may exclude deductions for qualified parking, commuter expenses and transit passes. However, the tax exclusion suspends qualified bicycle commuting reimbursements for tax years beginning after Dec. 31, 2017, and before Jan. 1, 2026.
Moving Expense Reimbursements
Also, the tax exclusion suspends qualified moving expense reimbursements for tax years beginning after Dec. 1, 2017, and before Jan. 1, 2026. The exclusion is limited to members of the U.S. armed forces on active duty who move due to changing stations.
The 50% limit on food or beverage expense deductions also applies to these expenses that are excluded from employees’ income. However, food or beverage expenses related to employee recreation, such as holiday parties or annual picnics, are not subject to the 50 percent limit on deductions when made primarily for the benefit of employees, other than certain highly compensated employees.
Employee Achievement Awards
Employers may exclude the value of tangible personal property that is given to an employee as an award for either length of service or safety achievement. The new tax law clarifies that the tax exclusion does not apply to awards of cash, cash equivalents, gift cards, gift coupons or gift certificates (other than arrangements in which the employee selects from a limited array of items preselected and preapproved by the employer). The tax exclusion also does not apply to vacations, meals, lodging, tickets to theater or sporting events, stock, bonds, other securities and similar items.
Let Plexus Lend a Hand
Have questions regarding this newsletter or or other employee benefits matters? Contact a Plexus client service team representative in Deer Park, Ill. (847.307.6100), Chicago (312.606.4800), Dallas (972.770.5010), or Oklahoma City (405.840.3033). We’re here to help — and we’re happy to help.
Disclaimer and publishing credit: This Compliance Bulletin is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. © 2018 Zywave, Inc. All rights reserved.
For some employers, the end of 2017 could bring some unwanted news from the IRS. Recently, the IRS signaled it will begin to send enforcement letters to firms that owe back penalties for not complying with the Affordable Care Act's "Employer Shared Responsibility Requirement" in calendar year 2015 (tax season 2016). According to the IRS, affected firms should expect to see the letters late this year.
Under the Affordable Care Act, employers with at least 50 full-time employees (or full-time equivalents) must offer health coverage to those associates. They must also offer minimum essential coverage to the employees, and the coverage must meet an affordability standard. Firms complete IRS Forms 1094-1095 to document compliance with ACA.
Firms can dispute the proposed penalties, and the IRS website offers some guidance on the appeals process.
Have questions regarding IRS ACA enforcement and compliance?
We can help. Contact a Plexus client service team representative in Deer Park, Ill. (847.307.6100), Chicago (312.606.4800), Dallas (972.770.5010), or Oklahoma City (405.840.3033). We’re here to help – and we’re happy to help.
For many employees, the opportunity to purchase group-term life insurance through employers is an expected benefit of the job. However, group-term life insurance policyholders should be aware of imputed income, a taxable event that can result from having more than $50,000 in life insurance. In short, group-term life insurance greater than $50,000 is considered a taxable benefit, and any imputed income from the benefit must be reflected on an individual’s W-2, as Internal Revenue Service Publication 15-B notes. Furthermore, employers must be aware that imputed income is subject to Medicare and Social Security taxation, as well as potential federal income tax withholding, per IRS guidance.
According to the IRS, imputed income can come into play for policies over $50,000 if an employer contributes to an employee’s policy payment or if the employer “arranges for the premium payments and the premiums paid by at least one employee subsidize those paid by at least one other.” This, per IRS parlance, is referred to as the “straddle” rule. Either circumstance means the group-term life insurance policy is carried directly or indirectly by the company and is thus a taxable fringe benefit, per the IRS.
According to the IRS, imputed income is calculated this way for life insurance policies in excess of $50,000:
-- Subtract $50,000 from the total value of the life insurance policy.
-- Divide this figure (the excess life insurance) coverage by 1,000.
-- Multiply this figure by the number of months the policy covered in the tax year.
-- Multiply this figure by the corresponding IRS cost of $1,000 per coverage per the employee’s age bracket (see below).
-- Subtract the annual cost contributed by the individual toward insurance. For reference, here is the most recent IRS age-band table used for coverage over $50,000:
Age Cost Under 25 $.05 25 through 29 $.06 30 through 34 $.08 35 through 39 $.09 40 through 44 $.10 45 through 49 $.15 50 through 54 $.23 55 through 59 $.43 60 through 64 $.66 65 through 69 $1.27 70 and older $2.06
For instance, a 57-year-old employee with $150,000 in group-term life insurance for 12 months of 2015 contributing $240 annually would have $278 in imputed income.
The calculation: ((12 months) x ($150,000-$50,000)/1,000) x (0.43)) - $240.
Employers and employees need to be aware of the tax ramifications of group-term life insurance and imputed income. If you would like more information on these subjects or are interested in strategic insurance solutions for your company, call 847.307.6100 (Chicago), 972-770-5010 (Dallas) or 405-241-9462 (Oklahoma City) to speak to a Plexus professional, or visit us on the Web at plexusgroupe.com.