More healthcare-related regulatory news for plan sponsors, including links to detailed information.
IRS issues guidance on the “use-or-lose” rules for health FSAs
The Internal Revenue Service (IRS) has issued Notice 2013-71, announcing that employers can allow participants in health flexible spending arrangements (FSAs) to carry over up to $500 of unused health FSA balances at the end of a plan year.
Notice 2013-71 updates guidance on the “use-or-lose” rule to add flexibility and help FSAs meet consumers’ needs. For the first time, participants will be able to carry over, instead of forfeit, up to $500 of unused amounts remaining at year-end, said the Treasury Department in a fact sheet issued with the notice.
IRS issues revenue procedure with certain adjusted tax table and section 132(f)(2) fringe benefits
The IRS has issued Revenue Procedure 2013-35 providing the 2014 cost-of-living adjustments for inflation for certain items, including the tax tables; of special interest to employee benefit practitioners are:
• Qualified transportation fringe benefit:
For taxable years beginning in 2014, the monthly limitation under Section 132(f)(2)(A) regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass is $130. The monthly limitation under Section 132(f)(2)(B) regarding the fringe benefit exclusion amount for qualified parking is $250.
• Employee health insurance expense for small employers:
For calendar year 2014, the dollar amount in effect under Section 45R(d)(B) is $25,400. This amount is used under Section 45R(c) for limiting the small employer health insurance credit and under Section 45R9D)(1)(B) for determining who is an eligible small employer for purposes of the credit.
• Limitation on health flexible spending arrangements (FSAs):
For the taxable years beginning in 2014, the dollar limitation under Section 125(i) on voluntary employee salary reductions for contributions to health FSAs is $2,500.
Also provided are the eligible long-term care premiums and the amounts permitted under medical savings accounts (MSAs).
Social Security announces 1.5% benefit increase for 2014
The Social Security Administration (SSA) has announced a 1.5% cost-of-living adjustment for 2014. For 2014, the Social Security taxable wage base will increase to $117,000. The Social Security Old-Age, Survivors, and Disability Insurance (OASDI) tax rate will be 6.2% on wages up to the $117,000 wage base.
The Medicare Hospital Insurance (HI) tax rate generally will remain at 1.45% on all wages. However, the employee portion of the Medicare HI tax increases by 0.9% on wages paid to an individual exceeding $200,000 ($250,000 for married couples filing jointly).
An individual who attains Social Security normal retirement age 66 in 2014 (born in 1948) will be eligible to commence unreduced Social Security benefits. Most individuals born in earlier years have a lower normal retirement age, and those born later will have a higher normal retirement age, with a maximum age of 67 for those born in 1960 and later.
For a copy of the SSA’s fact sheet, click here.
Medicare Part A and Part B COLAs for 2014
The Centers for Medicare and Medicaid Services (CMS) has issued the cost-of-living adjustments (COLAs) applicable to components in the Medicare program. For 2014, the rates will be as follows:
• Medicare Part A (hospital insurance) payroll tax remains at 1.45% (paid by employers and employees) on all wages, plus an additional 0.9% (for a total of 2.35%) for high-income individuals (earnings over $200,000 for an individual or over $250,000 for joint filers), to be assessed only on the employees.
• Medicare Part A inpatient hospital deductible increases to $1,216 (up from $1,184 in 2013).
• Medicare Part A daily coinsurance amounts: $304 for the 61st through 90th days of hospitalization in a benefit period (up from $296), $608 for lifetime reserve days (up from $592), and $152 for the 21st through 100th day of extended care services in a skilled nursing facility in a benefit period (up from $148).
• Medicare Part A premium to purchase coverage: $426 (down from $441 in 2013), and for those entitled to a reduced monthly premium, $234 (down from $243 in 2013).
• Medicare Part B deductible: $147.00 (unchanged from 2013).
• Medicare Part B standard monthly premium: $104.90 (unchanged from 2013).
For more information, click here.
CMS releases steps for employers to apply for coverage in the SHOP marketplace
CMS has released a chart with the five steps employers need to apply for coverage under the Small Business Health Options Program (SHOP) marketplace. The steps include:
1. Create an account at healthcare.gov.
2. Download the SHOP application; mail your application. CMS will notify you about your eligibility to buy coverage through the SHOP marketplace.
3. Log in to healthcare.gov and fill out the employee worksheet. This will be used to estimate your SHOP coverage costs and eligibility for your business.
4. Choose a health plan that meets your needs.
5. Come back to the online SHOP application and review which of your employees accepted coverage.
For more information, click here.