PRE-TAX TRANSIT BENEFIT CHANGES & NEW PROPOSED EMPLOYER SHARED RESPONSIBILITY REGULATIONS UNDER PPACA
I. Pre-tax transit benefits changes to $240 from $125
The fiscal cliff deal recently signed by President Obama includes the restoration of pre-tax transit benefits to $240 per month. Employer-provided parking benefits remain at $240 per month. In 2012, employees could only withhold $125 per month pre-tax for transit benefits.
It is important to allow your employees to adjust their elections to reflect the increase in pre-tax transit benefits for the 2013 plan year. The legislation also states that the new transit limit is retroactive to January 1, 2012, meaning employees may be able to recoup the benefit in their upcoming tax returns. However, additional guidance is necessary to know how to administer this retroactive payment.
II. New Proposed Employer Shared Responsibility Regulations under PPACA
The IRS issued proposed regulations on the employer shared responsibility provision of the Affordable Care Act. Comments on the proposed regulations are due by March 18, 2013.
The employer shared responsibility provision mandates that an employer with at least 50 full-time employees offer affordable, minimum essential coverage or face a penalty. The proposed IRS regulations clarify and provide details surrounding the provision effective on January 1, 2014. The highlights include:
- In 2014, if an employer meets the 50 full-time employee threshold, the employer generally will be liable for an Employer Shared Responsibility payment only if:
- (a) The employer does not offer health coverage or offers coverage to less than 95% of its full-time employees, and at least one of the full-time employees receives a premium tax credit to help pay for coverage on an Exchange; OR
- (b) The employer offers health coverage to at least 95% of its full-time employees, but at least one full-time employee receives a premium tax credit to help pay for coverage on an Exchange, which may occur because the employer did not offer coverage to that employee or because the coverage the employer offered that employee was either unaffordable to the employee or did not provide minimum value.
- After 2014, the rule in paragraph (a) applies to employers that do not offer health coverage or that offer coverage to less than 95% of their full time employees and the dependents of those employees.
- An employer must provide affordable coverage to its full-time employees and their dependents in order to avoid paying a penalty. Offering coverage to an employee’s spouse is not required.
- IRS has provided transitional relief with respect to dependent coverage for plan years that begin in 2014 since some employers may not provide such coverage now. An employer that takes steps during the 2014 plan year toward offering coverage to full-time employees’ dependents will not be subject to a penalty.
- Non-calendar year plans in existence on December 27, 2012 are provided transitional relief regarding 2014 compliance.
- If an employer offers affordable health coverage and employees are eligible to participate in the plan by the first day of the plan year starting in 2014, the employer will not be subject to any penalties in 2014 before the start of the 2014-2015 plan year.
For more information, please see the IRS released set of questions and answers:http://www.irs.gov/uac/Newsroom/Questions-and-Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act ; or the IRS proposed regulations at http://www.irs.gov/pub/newsroom/reg-138006-12.pdf .