Compliance Briefing Center

Regulatory Updates

{Making it Easier for You
to Manage Benefits}

2016 Index Figures

The Internal Revenue Service (IRS) and Social Security Administration have released the cost-of-living (COLA) adjustments that apply to dollar limitations set forth in certain IRS Code Sections. The Consumer Price Index did not increase since the third quarter of last year and therefore warranted no increase in most indexed figures for 2016.

Social Security and Medicare Wage Base
For 2016, the Social Security wage base is $118,500. The Social Security rate of 6.2% is applied to wages up to the maximum taxable amount for the year; the Medicare portion of 1.45% applies to all wages. In addition, starting with the 2013 taxable year, individuals are liable for a 0.9 percent "Additional Medicare Tax" on all wages exceeding specific threshold amounts.

 

2013

2014

2015

2016

Social Security Wage Base

$113,700  

$117,000  

$118,500  

$118,500

Employee Social Security Rate

6.2%

6.2%

6.2%

6.2%

Employee Medicare Rate

1.45%

1.45%

1.45%

1.45%

Total Employee Rate

7.65%

7.65%

7.65%

7.65%

Employer Matching Rate

7.65%

7.65%

7.65%

7.65%

 

Indexed Compensation Levels 

For highly compensated and Key Employee definitions:

  2013 2014 2015 2016
Highly Compensated Employee $115,000 $115,000 $120,000 $120,000
Top Paid Group of 20% $115,000 $115,000 $120,000 $120,000
Key Employee, Officer $165,000 $170,000 $170,000 $170,000

   

401(k) Plans 

 

2013

2014

2015

2016

Maximum Employee Deferral

$17,500

$17,500

$18,000

$18,000

Catch up allowed for those 50 and over

$5,500

$5,500

$6,000

$6,000 

 

Healthcare FSA

 

2013

2014

2015

2016

Salary Reduction Annual Limit

$2,500

$2,500

$2,550

$2,550 

 

Adoption Credit

 

2013

2014

2015

2016

Phase Out (modified AGI)

$194,580 to
$234,580

$197,880 to
$237,880

$201,010 to
$241,010

$201,920 to
$241,920

Adoption Expenses

$12,970

$13,190

$13,400

$13,460

 

The exclusion from income provided through an employer or a Section 125 cafeteria plan for adoption assistance also has a $13,460 limit for the 2016 taxable year. And remember - a participant may take the exclusion from income and the tax credit if enough expenses are incurred to support both programs separately.

 

Health Savings Account (HSA)

 

2013

2014

2015

2016

Minimum deductible amounts for the qualifying high-deductible health plan (HDHP)

Individual coverage

$1,250

$1,250

$1,300

$1,300

Family coverage

$2,500

$2,500

$2,600

$2,600

Maximum contribution levels

Individual coverage

$3,250

$3,300

$3,350

$3,350

Family coverage

$6,450

$6,550

$6,650

$6,750

Catch up allowed for those 55 and over

$1,000

$1,000

$1,000

$1,000

Maximums for HDHP out-of-pocket expenses

Individual coverage

$6,250

$6,350

$6,450

$6,550

Family coverage

$12,500

$12,700

$12,900

$13,100

 

Archer Medical Savings Account (MSA)
Although new MSAs are not allowed, maximum contributions to an existing MSA that are attributable to a single-coverage plan is 65% of the deductible amount. Maximum contributions for a family-coverage plan are limited to 75% of the deductible amount. MSA contributions must be coordinated with any HSA contributions for the taxable year and cannot exceed the HSA maximums. 

 

2013

2014

2015

2016

Minimum deductible amounts for the qualifying high deductible health plan (HDHP)

Individual coverage

$2,150 - $3,200

$2,200 - $3,250

$2,200 - $3,300

$2,250 - $3,350

Family coverage

$4,300 - $6,450

$4,350 - $6,550

$4,450 - $6,650

$4,450 - $6,700

Maximum contribution levels

Individual coverage -
percentage of deductible amount

65%

65%

65%

65%

Family coverage -
percentage of deductible amount

75%

75%

75%

75%

Maximums for HDHP out-of-pocket expenses

Individual coverage

$4,300

$4,350

$4,450

$4,450

Family coverage

$7,850

$8,000

$8,150

$8,150

 

Dependent and/or Child Daycare Expenses
Just a reminder that although the daycare expense limit associated with a cafeteria plan is not indexed, the tax credit available through a participant's tax filing was raised in 2003. The daycare credit must be filed on Form 2441 and attached to the 1040 tax filing form. The limits for the daycare credit expenses are $3,000 of expenses covering one child and $6,000 for families with two or more children. If one of the parents is going to school full time or is incapable of self-care, the non-working spouse would be "deemed" as earning $250 per month for one qualifying child and $500 for two or more qualifying children. This "deemed" earned income is used whether a person is using the employer's cafeteria plan or taking the daycare credit.

The cafeteria plan daycare contribution limit is $5,000 for a married couple filing a joint return, or for a single parent filing as "Head of Household." For a married couple filing separate returns, the limit is $2,500 each. The daycare credit is reduced dollar for dollar by contributions to or benefits received from an employer's cafeteria plan. An employee may participate in their employer's cafeteria plan and take a portion of the daycare expenses through the credit if they have sufficient expenses in excess of their cafeteria plan annual election, but within the tax credit limits.

Commuter Accounts

 

2013

2014

2015

2016

Parking - monthly limit

$245

$250

$250

$255

Transit and Vanpooling - monthly limit

$245

$250*

$250**

$255

*Retroactive increase 12/2014

**Retroactive increase 12/2015

 

Long-Term Care 

 

2013

 2014

 2015 

2016

Non-taxable per day payment

$320

$330

$330

$340

 

You can find the Revenue Procedures here.

Standard Mileage Rates

The standard mileage rates decreased for 2016:

  

Purpose

2013

 2014

 2015

 2016

Business

.565

.56

.575

 .54

Medical/Moving

.24

.235

.23

 .19

Charitable

.14

.14

.14

.14

 

Earned Income Tax Credit (EITC)Finally, by participating in a cafeteria plan, the participant will be lowering their income for the Earned Income Tax Credit (EITC). Check out the new limits in IRS Publication 596 "Earned Income Credit" and for more information about this tax credit. Click here for a downloadable copy of this report.