It’s the most wonderful time of the year — when the IRS announces limits and adjustments on employee benefit plans. On Oct. 19, the IRS released its 2018 Cost-Of-Living Adjustments (COLAs) for tax-related employee benefits in Revenue Procedure 2017-58 and in IRS Notice 2017-64. Some limits have increased while others remained the same.
What Employers Need to Know
• Health Flexible Spending Accounts Increased. The annual employee salary contribution limit to health flexible spending accounts (FSAs) will increase to $2,650 for 2018 (a $50 increase from 2017). An employer may decide to have a different limitation on employee health FSA contributions, it just cannot be more than the IRS limit. The limit applies on an employee-by-employee basis. Any non-elective employer contributions generally do not count toward the employee’s dollar limit.
• The monthly limit under IRC Section 132 for fringe benefits is $260 for the combined monthly limit for transit pass and vanpooling expenses. The monthly limit for parking expenses is also $260 per month.
• Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) is an HRA that is available only to small employers that are not subject to the employer shared responsibility penalties under health care reform. As of January 1, 2018, the limitation for QSEHRA payments and reimbursements is $5,050 for an individual and $10,250 for family. This is a $50 increase for individual reimbursements and a $250 increase for family reimbursements.
• The penalty for failure to file correct information returns (which include W-2s, W-3s, 1095 and 1094-C’s will increase to $270 per failure. This increased penalty will be applicable for returns required to be filed in 2019.
The table above demonstrates the 2018 limits for many of the common benefits offered by employers. This is not a comprehensive list.
Employers should begin to review their payroll and plan administration systems for the 2018 adjustments. When preparing open enrollment materials, an employer should incorporate these limits in any communications.
Finally, the employer should determine to distribute updated Summary Plan Descriptions (SPD) or provide a Summary of Material Modifications (SMM) for any required amendments.