Insights

On November 6, 2019, the IRS published Revenue Procedure 2019-44, which relates to certain cost-of-living adjustments for a wide variety of tax-related items, including health FSA contribution limits, transportation and parking benefits, qualified small employer health reimbursement arrangements (QSEHRAs), penalties for ACA reporting, the small business tax credit, and other adjustments for tax year 2020. Those changes are outlined below.

• Health FSAs: For plan years beginning in 2020, the annual limit on employee contributions to a health FSA will be $2,750 (up $50 from 2019).
• Transportation/Commuter Benefits: For 2020, the monthly limit on the amount that may be excluded from an employee’s income for qualified parking increases to $270 (up $5 from 2019), as does the aggregate fringe benefit exclusion amount for transit passes.
• Adoption Assistance: For 2020, the maximum amount an employee may exclude from their gross income under an employer-provided adoption assistance program for the adoption of a child is $14,300 (up from $14,080 in 2019).
• QSEHRAs: For 2020, the maximum amount of reimbursement under a QSEHRA may not exceed $5,250 for self-only coverage and $10,600 for family coverage (an increase from $5,150 and $10,450, respectively, in 2019).
• ACA Employer Reporting Penalties: For 2020 employer mandate reporting (Forms 1094/95-C filed in early 2021), the penalties for failure to report will be $280 per return, with a maximum of $3,392,000 (up from $270 per return and a $3,275,000 per calendar year maximum for 2019 returns).
• Small Business Tax Credit: For 2020, the average annual wage level at which the credit phases out for small employers is $27,600 (up $500 from 2019). The maximum credit is phased out based on the employer’s number of full-time equivalent employees in excess of 10.

Employers with limits that are changing (such as for health FSAs, transportation/commuter benefits, and adoption assistance) will need to determine whether their plan documents automatically apply the latest limits or must be amended (if desired) to recognize the changes. Any changes in limits should also be communicated to employees.

Revenue Procedure 2019-44 »