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November 15, 2013

Cost-of-Living and Other Adjustments

Health FSAs

For 2014, the dollar limitation on employee salary reduction contributions to health FSAs is unchanged at $2,500. This annual limit is not affected by the new Carryover option.

Qualified Transportation Fringe Benefits

For 2014, the combined monthly limit for transit passes and vanpooling expenses reduces to $130, a decrease of $115 a month from 2013. This decrease is due to expiration of the temporary “rule of parity” that made the combined monthly limit for transit and vanpooling in 2012 and 2013 the same as the monthly parking limit; whether Congress will eventually extend the rule of parity to 2014 is uncertain. For 2014, the monthly limit for qualified parking benefits is $250 (a $5 increase from the 2013 limit of $245).

Adoption Assistance Exclusion and Adoption Credit

The maximum that may be excluded from an employee’s gross income under an employer-provided adoption assistance program for the adoption of a child will be $13,190 for 2014 (up $220 from 2013). The maximum adoption credit allowed to an individual for the adoption of a child will be $13,190 for 2014 (also up $220 from 2013). For 2014, both the exclusion and the credit begin phasing out for individuals with modified AGI’s greater than $197,880 and will be entirely phased out for individuals with modified AGI’s of $237,880 or more (up $3,300 from 2013).

DCAPs

The non-indexed $5,000/$2,500 DCAP limit remains unchanged.

Small Business Health Care Tax Credit

For 2014, the average annual wage level at which the tax credit begins to phase out for eligible small employers is $25,400 (up $400 from 2013). The maximum average annual wages to qualify for the credit as an “eligible small employer” for 2014 (adjusted for the first time) will be $50,800 (up $800).

Archer MSAs

For Archer MSA-compatible high-deductible health coverage, the annual deductible for self-only coverage must not be less than $2,200 (up $50 from 2013) or more than $3,250 (up $50), with an out-of-pocket maximum of $4,350 (up $50). For family coverage, the annual deductible must not be less than $4,350 (up $50 from 2013) or more than $6,550 (up $100), with an out-of-pocket maximum of $8,000 (up $150).

For more information on these and other 2014 limits, download IRS Rev. Proc. 2013-35.