Blink and you may have missed changes to some of the smaller fringe benefit limits.
After all, in recent weeks your team has been working hard to adjust for federal changes for everything from the taxable wage base to 401(k) contribution limits. That’s on top of all their other year-end duties.
But many of these “smaller” perks can mean a lot to some members of your workforce.
So you’ll want this rundown of the changes IRS recently released.
IRS Revenue Procedure 2019-44 spells out the cost-of-living adjustments for many key fringe benefits for the new year.
To make sure your finance team is ready for Jan. 1, take a look:
Qualified transportation fringe benefits: The monthly limit your team can exclude from employee income is:
- $270 for both qualified parking, and
- $270 combined for transportation in a commuter highway vehicle or transit passes.
Both are $5 increases over 2019’s limits.
Remember, the Tax Cuts and Jobs Act eliminated the deduction for employers for these benefits. But it didn’t change employee reimbursement for them.
Adoption assistance: The amount you can exclude from employees’ income for the adoption of a child under an adoption assistance program lands at $14,300 in 2020.
Note: The phase-out for the exclusion for this fringe benefit limit begins for individuals with modified adjusted gross incomes exceeding $214,520. It gets phased out entirely for individuals with modified adjusted gross incomes of $254,520 and greater.
Healthcare fringe benefit limits
Cafeteria plans: Employees can contribute $50 more in 2020 – salary reductions for flexible spending accounts (FSAs) get capped at $2,750.
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs): This fringe benefit limit is for smaller employers and non-profits. For 2020, the maximum amount of payments and reimbursements under a QSEHRA will be $5,250 for self-only coverage. And it shifts to $10,600 for family coverage (up $100 and $150, respectively).
Archer MSAs: For Archer MSA-compatible high-deductible health coverage, the annual deductible for self-only coverage must not be less than $2,350 (that’s the same as in 2019) or more than $3,550 (a $50 increase). The out-of-pocket maximum increases to $4,750 (up $100). For family coverage, the annual deductible must not be less than $4,750 or more than $7,100. The out-of-pocket maximum will be $8,650 (all $100 jumps).
