2016 IRS Qualified Plan Limits
The salary deferral limit for 401(k) plans and 403(b) plans remains unchanged for 2016 at $18,000. The catch-up contribution limit for employees aged 50 and over who participate in 401(k) and 403(b) plans remains unchanged at $6,000.
The limit on compensation which can be taken into account under qualified plans (pension as well as 401(k) or profit sharing plans) remains unchanged at $265,000.
The definition of highly compensated employee for the various tests under qualified plans remains unchanged at $120,000.
High Deductible Health Plan and HSA Limits
Earlier in the year the IRS announced the 2016 HSA and High Deductible Plan limits. The HSA limits are $3,350 for individual and $6750 for family coverage. The HDHP maximum out of pocket limits on expenses (deductibles, co-payments, but not premiums) is $6,550 for individuals and $13,100 for family coverage.
Consolidated Appropriations Act, 2016, HR 2029
This Act, signed by the President on December 18, 2015, delays the High Cost Employer Sponsored Health Coverage Excise Tax (Cadillac Tax) for two years, from 2018 to 2020. This portion of the Affordable Care Act imposes a 40% excise tax on the excess benefit of employer sponsored coverage. This tax is on the premium cost (employer and employee) which exceeds a limit of $10,200 for self only coverage and $27,500 for other than self only coverage. The excise tax was also changed so it is now deductible, which will lessen its impact on employers and health insurers.
IRS Notice 2015-87
This Notice contains a collection of explanations regarding the Affordable Care Act.
Employer ACA Penalty Increases: Of note is that the large employer (50 or more full time employees and equivalents) penalty limits which can apply when coverage is not offered are increased as follows: The $2,000 annual penalty per full time employee for failure to offer coverage is indexed to $2,080 for 2015 and to $2,160 for 2016. The $3,000 annual penalty per full time employee who receives subsidized coverage from an Exchange when an employer fails to offer affordable, minimum value coverage is increased to $3,120 for 2015 and to $3,240 in 2016.
Opt-out Payments and Affordability: For ACA large employer penalty purposes, there are rules defining whether coverage is affordable. Generally, these safe harbors provide that coverage is affordable if the cost to an employee of self-only coverage does not exceed 9.5% of wages. This Notice at Q-9 indicates that certain opt-out payments are added to the employee contribution when determining the cost of coverage for affordability purposes. Example from the Notice: Employee monthly salary deferral for the health plan is $200. Monthly opt-out payment if coverage is declined is $100. To determine whether coverage was affordable, the employee contribution is deemed to be $300, the deferral amount plus the foregone opt out payment. The guidance indicates that this rule will not apply to existing arrangements until after regulations are finalized.
Elsewhere in the Notice the IRS indicates that the safe harbor affordability calculation can be based on 9.56% for 2015 and 9.66% for 2016.
To view the IRS Notice, please click here.
IRS Notice 2016-4, Extension of Due Dates for 2015 Employer Affordable Care Act Reporting
Under ACA, employers of 50 or more full time employees and equivalents are required to report to full time employees and the IRS about that coverage for the 2015 year, with reports due in early 2016. These reports are made on Form 1094-C (transmittal form to the IRS) and Form 1095-C, distributed to employees and filed with the IRS. The regulations required these forms to be prepared and distributed on the same time frame as W-2s, with the 1095-C due to employees at the end of January and due to the IRS either by February 29, 2016 if not filing electronically, and by March 31, 2016, if filing electronically. (Electronic filing is required for 250 or more returns.)
This Notice delays the reports as follows: Form 1095-C to full time employees is now due March 31, 2016 and to the IRS on May 31, 2016 if not filing electronically and June 30, 2016 if filing electronically. The Notice explains that employers that do not comply with the extended due dates may be subject to penalties for failure to timely furnish and file.