October 31st, 2014
The IRS announced annual cost of living adjustments (COLA) for 2015. Notably, the annual cap on Health Flexible Spending Arrangements (FSA) has been increased from $2500 to $2550 for 2015 plan years.
Also, the Qualified Transportation Fringe Benefit limitations for 2015 will be $130 per month for transportation in a commuter highway vehicle and for transit passes and the monthly limitation for qualified parking in 2015 will be $250.
The 2015 COLAs are listed in IRS Revenue Procedure 2014-61.
April 3rd, 2014
On March 28, 2014 the IRS released IRS Memorandum 201413006 on Health Flexible Spending Arrangement (FSA) correction procedures for improper debit card transactions.
In cases in which all other correction procedures have been exhausted by the employer and the employer treats the improper payment as business indebtedness in accordance with Prop. Treasury Reg. §1.125-6(d)(7)(v), the improper payment should be reported by the employer to the employee as wages on a Form W-2 to the extent the employer forgives the indebtedness after requesting payment consistent with collection procedures for other business indebtedness. The amount included in income is subject to withholding for income tax, FICA and FUTA, since the benefits are made available to the employee by the employer for the performance of services. The improper payment is reportable in the taxable year of the employee in which the indebtedness is forgiven.
April 3rd, 2014
On March 28, 2014 the IRS released IRS Memorandum 201413005 on Health Flexible Spending Arrangement (FSA) Carryovers and Eligibility for a Health Savings Account (HSA).
- An individual who is covered by a general purpose health FSA that pays or reimburses all qualified medical expenses is not an eligible individual for purposes of making contributions to an HSA. This includes an individual who has coverage in a general purpose HSA solely as the result of a carryover of unused amounts in a health FSA from the prior year.
- An individual who is covered by a general purpose health FSA that pays or reimburses all qualified medical expenses is not an eligible individual for purposes of making contributions to an HSA during the entire plan year of the health FSA without regards to the amount available from the health FSA for any month during the plan year. Thus, an individual covered by a general purpose health FSA solely as the result of a carryover of unused amounts in a health FSA may not contribute to an HSA even for months in the plan year after the health FSA no longer has any amounts available to pay or reimburse medical expenses.
- An individual who participates in a general purpose health FSA and elects, for the following year, to participate in an HSA-compatible health FSA may elect to have any unused amounts from the general purpose health FSA carried over to the HSA-compatible health FSA. There is no requirement that the unused amounts in the general purpose health FSA only be carried over to a general purpose health FSA. However, the carryover amounts may not be carried over to a non-health FSA or another type of cafeteria plan benefit.
- A cafeteria plan that offers both a general purpose health FSA and an HSA- compatible health FSA may automatically treat an individual who elects coverage in an HDHP for the following year as enrolled in the HSA-compatible health FSA and carry over any unused amounts from a general purpose health FSA to the HSA compatible health FSA for the following year.
- A cafeteria plan may provide that if an individual participates in a general purpose health FSA that provides for a carryover of unused amounts, the individual may elect prior to the beginning of the following year to decline or waive the carryover for the following year. In that case, the individual who declines under the terms of the cafeteria plan may contribute to an HSA during the following year if the individual is otherwise eligible.
- If an individual elects to carry over unused amounts from a general purpose health FSA to a HSA-compatible health FSA, the uniform coverage rules may be applied during the run- out period of the general purpose health FSA as follows:
During the run-out period for the general purpose health FSA, the unused health FSA amounts may be used to reimburse any allowed section 213(d) medical expenses incurred prior to the end of the general purpose health FSA plan year. Any claims covered by the HSA-compatible health FSA must be timely reimbursed up to the amount elected for the HSA-compatible health FSA plan year. Any claims in excess of the elected amount may be reimbursed after the run-out period when the amount of any carryover is determined.
October 31st, 2013
The Department of Treasury issued Notice 2013-71 and an informational fact sheet today that modifies the long standing “use-it-or-lose-it” rules relating to flexible spending accounts (FSAs). The modification allows for a limited rollover of unused FSA dollars as follows:
- Effective in plan year 2014, employers that offer FSA programs will have the option of allowing participants to roll over up to $500 of unused funds at the end of the plan year.
- Effective immediately, employers that offer FSA programs that do not include a grace period will have the option of allowing employees to roll over up to $500 of unused funds at the end of the current 2013 plan year.
August 29th, 2013
On August 29, 2013, the IRS issued Revenue Ruling 2013-17 regarding the tax treatment of same-sex couples.
The Ruling Held that:
1. For Federal tax purposes, the terms “spouse,” “husband and wife,” “husband,” and “wife” include an individual married to a person of the same sex if the individuals are lawfully married under state law, and the term “marriage” includes such a marriage between individuals of the same sex.
2. For Federal tax purposes, the Service adopts a general rule recognizing a marriage of same-sex individuals that was validly entered into in a state whose laws authorize the marriage of two individuals of the same sex even if the married couple is domiciled in a state that does not recognize the validity of same-sex marriages.
3. For Federal tax purposes, the terms “spouse,” “husband and wife,” “husband,” and “wife” do not include individuals (whether of the opposite sex or the same sex) who have entered into a registered domestic partnership, civil union, or other similar formal relationship recognized under state law that is not denominated as a marriage under the laws of that state, and the term “marriage” does not include such formal relationships.