The end of 2015 brought more Affordable Care Act (ACA) guidance. On December 16, 2015, the IRS issued IRS Notice 2015-87, providing further guidance on the application of certain ACA group health market reforms. Many of the changes are applicable to plan years beginning on or after December 16, 2015, however, some of these changes are retroactive. Some of the key areas addressed in the Notice include:
- The 4980H(a) employer penalty for failure to offer minimum essential health coverage to substantially all full-time employees will be adjusted for inflation, from $2,000 to the following levels:
- $2,080 for 2015 and
- $2,160 for 2016
- The 4980H(B) penalty (the penalty that applies if coverage offered is unaffordable, or does not meet minimum value) will be indexed as well, from $3,000 to $3,120 for 2015 and $3,240 for 2016.
- The affordability safe harbor percentages for employer-sponsored health coverage will be increased, from 9.5% for purposes of the W-2, Federal Poverty Line or Rate of Pay safe harbor. The adjusted percentages will be 9.56% for 2015 and 9.66% for 2016, to mirror the individual shared responsibility affordable coverage threshold.
- Notice 2015-87 supplements previous guidance addressing health reimbursement arrangements (HRAs) and employer payment plans (group health plans under which an employer pays for an employee’s individual health insurance premiums).
To learn more, please click here: IRS Addresses ACA Rules for Employer-provided Health Coverage
In addition to ACA guidance, we received further guidance regarding mass transit limits. Following an increase in the mass transit limit provided in the federal budget bill signed into law on December 18, 2015, the IRS issued Notice 2016-6 on Jan. 11, 2016 providing guidance on how the tax limit increase for mass transit applies for 2015. In summary:
- The tax limit for transit benefits is now permanently equal to the limit for parking benefits; the monthly tax exclusion for transit benefits was previously $130, while the exclusion for parking benefits was $250;
- Employers are not required to provide additional transit benefits to their employees for 2015 due to the retroactively increased limit;
- Employees may not retroactively increase their compensation reduction for 2015 to take advantage of the increase in the excludable amount for transit benefits; and
- Employees may not reduce their compensation by more than $255 per month in 2016 in order to receive any permissible reimbursement for transit expenses incurred in 2015.
To learn more, please click here: Federal Budget Provides Transit Parity