Tag Archives: compensation & benefits

IRS Updates: Benefit Plan Limits for 2014 and New "Use it or Lose it" Choice for Cafeteria Plans

The 401(k) deferral and catch-up limits remain at $17,500 and $5,500, respectively. Other limits remain the same or were slightly increased. Details are at this link.

The IRS has just come up with a new optional carryover rule for a healthcare flexible spending account (Health FSA) in a cafeteria plan. Up to $500 of unused amounts from one year may be carried over and spent for claims incurred at any time in the next plan year. This is an alternative to the current carryover option, which permits carryovers of unused amounts,
without a $500 limit, to the first 2½ months of the following year. Neither carryover option is a government mandate. Cafeteria plans may still require forfeiture of flexible spending accounts which are not used for current plan year claims.

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Changes in IRS Limits for 2014

Federal statisticians are back to work, and have confirmed private sector estimates of the 2014 CPI adjustments that affect tax-favored employee benefits. Many of the limits will not change due to “low inflation.” Key provisions for retirement plan sponsors are in the following grid.

The full list is in IRS Rev. Proc.-2013-25. If you need historical data, IRS also maintains a helpful table showing yearly adjustments to most retirement plan limits since 1989. Finally, adjustments to non-retirement items, ranging from personal exemptions to the tax on arrow shafts, appear in IRS Rev. Proc. 2013-35.

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Massachusetts Abandons Section 125 Plan Requirement

Massachusetts has just eliminated another requirement of its Health Reform law. Covered employers no longer need to offer Section 125 plans to employees who do not have access to employer group insurance. Related Massachusetts penalties and notice requirements will not be enforced, and the Administration will ask the Legislature for a formal repeal. See Massachusetts Connector Administrative Bulletin 2013-3. 

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Health Insurance Alert for All Employers, Even Those That Do Not Offer Health Insurance

Important deadlines and requirements under the Affordable Care Act (ACA) and other statutes are just around the corner for U.S. employers, including small employers not required to sponsor health insurance. Here is a quick summary, with a special focus on Massachusetts employers:

September 30, 2013 is the deadline to provide a new notice to current employees (including parttimers). New employees must receive it within 14 days of starting work. Every employer covered by federal wage and hours laws must comply. That includes virtually all U.S. employers, with minor exceptions. 

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Key Tax Ruling for Same-Sex Marriage: What This Means for Employers

The federal agencies promised more guidance on same-sex marriage issues after the United States Supreme Court struck down the Defense of Marriage Act. On August 29, the IRS provided three key answers:

1. Marriage will be determined by the law of the state where a marriage is initially established, not by the law of the state where a person resides or works.
2. Civil unions will not be considered as marriages.
3. Persons in same sex-marriages have the right to file amended tax returns for open years to obtain all the tax benefits of marriage. 

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Supreme Court Strikes Down DOMA: What This Means in the Workplace

On June 26, 2013, the United States Supreme Court issued a very important decision in United States v. Windsor relating to same-sex marriage. The case relies on the old-sounding philosophy of states’ rights to support a modern concept. Persons in same-sex marriages will now be governed by the same federal rules that apply to heterosexual marriages. The federal Defense of Marriage Act (DOMA), which only recognized heterosexual marriages when doling out over 1,000 federal benefits and entitlements, is now confirmed as unconstitutional. In addition to qualifying for joint income tax rates and lower estate taxes, employee benefits just got better for same-sex families. Health insurance and flex plans can now be available on a tax-free basis to all same-sex spouses, not just those who meet the special tests for Section 105(b) dependent status. And same-sex spouses will now get ERISA retirement plan rights that were previously required only for heterosexual spouses.

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Administration Proposals Affecting Benefits and Employment


The Administration filed 256 pages of revenue proposals last week and our phones have been ringing. Is the government going to take my retirement account? Should I contribute anything more to my employees’ retirement plans? Was it a bad idea to convert to ROTH? Will my employment costs go up? Is there any incentive to hire new people?

Stay calm. It’s way too early to predict winners and losers. Congress has yet to weigh in, and additional ideas and compromises will surface. Why study proposals? Whether enacted or not in a current session, they reveal the thinking of those in power and give strong hints on how to plan for the future. More…

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Deadline Looming: Amendments to Many Executive Agreements Required by December 31


IRC §409A is the 2004 tax statute that was meant to regulate deferred compensation earned by employees and specified independent contractors. There is an important December 31 deadline. Any 409A plan or agreement (see the chart below) which requires a service provider to execute a release or other commitment before payment must be amended by December 31, 2012. In addition, the tax return of the “service recipient” which pays the deferred compensation must contain a schedule advising that the amendment has been executed. Without that two-step process, which IRS considers a correction, there can be serious penalties on the service provider of at least 20% of the amount involved, in addition to regular taxes. The IRS concern is that service providers can time the receipt of deferred compensation, either by signing releases quickly or delaying signature so that the release or commitment is not effective until a later year.

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IRS Limits Increase for 2013

The federal government has released the 2013 CPI adjustments which affect many tax-favored employee benefits. Key provisions for retirement plan sponsors are in the following grid, and the full list is in IR-2012-77. If you need historical data, IRS also maintains a helpful table showing yearly adjustments to most limits since 1989, including the 401(k) deferral limit in that year of only $7,627!

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