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IRS Publishes 2018 Required Amendments List

In Notice 2018-91, the IRS published the Required Amendments List for 2018, which lists statutory and administrative changes in plan qualification requirements that (i) are first effective in the plan year in which the list is published and (ii) may require a plan amendment. This year’s list did not include any such items. Nevertheless, a required amendment that was listed in the 2016 Required Amendments List must be adopted (if applicable to an employer’s plan) by December 31, 2018. That required amendment relates to restrictions on accelerated distributions from underfunded single-employer, collectively-bargained defined benefit plans due to a plan sponsor’s bankruptcy. Additional information on the 2016 Required Amendments List is available on our prior blog post. View Notice 2018-91

2018 HSA Contribution Limit Transition Relief

The IRS has issued guidance stating that taxpayers may use $6,900 as the maximum health savings account (“HSA”) contribution limit for family coverage for 2018. In 2017, the IRS stated that the maximum HSA contribution for family coverage for 2018 would be $6,900. However, recent tax reform legislation changed how the contribution limit is calculated, and in March of 2018, the IRS issued a reduced limit for 2018 of $6,850. The new IRS guidance now permits taxpayers to continue to treat the 2018 limit as $6,900 and also provides guidance for taxpayers who already received a distribution of an excess contribution in 2018 based on the $6,850 limit. View the guidance in Rev. Proc. 2018-27.

IRS Reduces HSA Family Coverage Contribution Limit for 2018, Effective Immediately

On March 5, 2018, the IRS issued Revenue Procedure 2018-18 (“Rev. Proc. 2018-18”), which, among other things, reduced by $50 the maximum annual contribution that an employee who has elected family coverage under the employer’s high deductible health plan (“HDHP”) could make to his or her health savings account (“HSA”) for 2018. Under the Internal Revenue Code, the applicable limits for HSAs are adjusted annually for any cost-of-living adjustments (“COLA”). Prior to the recent enactment of the Tax Cuts and Jobs Act (H.R. 1) (the “Tax Act”), COLAs were based on the Consumer Price Index (“CPI”). The Tax Act changed the basis of COLAs to instead use the Chained Consumer Price Index for All Urban Consumers (“C-CPI-U”). The HSA family coverage contribution limit that was previously announced by the IRS for 2018 was $6,900, which reflected a CPI-based COLA. The revised limit, pursuant to Rev. Proc. 2018-18 and reflecting the… Continue Reading

New Federal Budget Impacts Qualified Retirement Plans

The recently enacted Bipartisan Budget Act of 2018 (the “Act”) modifies certain Internal Revenue Code provisions relating to hardship distributions from qualified retirement plans that (i) eliminate the requirement that a participant’s deferrals be suspended for six months following a hardship distribution, (ii) eliminate the requirement that participants take out all available plan loans before receiving a hardship distribution, and (iii) expand the sources available to fund hardship distributions to include QNECs and QMACs. These changes to the hardship distribution rules are effective for plan years beginning on or after January 1, 2019. In addition to the changes for hardship distributions, the Act provides additional relief for victims of the recent California wildfires that permits eligible plan participants to receive a distribution of up to $100,000, which will not be subject to the mandatory 20 percent income tax withholding or the 10 percent early withdrawal penalty. The participant may elect… Continue Reading

IRS Announces 2018 Qualified Retirement Plan Limits

The IRS recently announced cost-of-living adjustments for 2018. Below is a list of some of the key annual limits that will apply to qualified retirement plans in 2018: Compensation limit used in calculating a participant’s benefit accruals: increased to $275,000. Elective deferrals to 401(k) and 403(b) plans: increased to $18,500. Annual additions to a defined contribution plan: increased to $55,000. Catch-up contributions for employees aged 50 and over to 401(k) and 403(b) plans: remains unchanged at $6,000. Annual benefit limit for a defined benefit plan: increased to $220,000. Compensation dollar limit for defining a “key employee” in a top heavy plan: remains unchanged at $175,000. Compensation dollar limit for defining a “highly compensated employee”: remains unchanged at $120,000. The full list of 2018 plan limits can be found in IRS Notice 2017-64.

Fringe and Welfare Benefit Limit Increases for 2018

On October 19, 2017, the IRS released Revenue Procedure 2017-58, which increases the 2018 limits for certain fringe and welfare benefits as follows: Health Care Flexible Spending Accounts: The maximum amount an employee may contribute toward a healthcare flexible spending account through salary reduction is $2,650. Qualified Transportation Benefits: The monthly limits for qualified parking expenses and commuter highway expenses/transit passes are $260. The limit for qualified bicycle commuting reimbursements is unchanged ($20 per month). Adoption Assistance Programs: The maximum amount that can be excluded from an employee’s gross income for qualified adoption expenses provided through an adoption assistance program is $13,840. This limit phases out for taxpayers whose modified adjusted gross income is over certain limits. Qualified Small Employer Health Reimbursement Arrangement (“QSEHRA”): The reimbursement limit for a QSEHRA is $5,050 for individual coverage and $10,250 for family coverage. QSEHRAs are limited to small employers with fewer than 50… Continue Reading

IRS Releases 2018 Inflation-Adjusted Amounts for HSAs and HDHPs

The IRS recently issued Revenue Procedure 2017-37, which sets the 2018 calendar year limits on (i) annual contributions that can be made to a health savings account (“HSA”) and (ii) annual deductibles and out-of-pocket maximums under a high deductible health plan (“HDHP”). The 2018 limits, which were increased across the board from the 2017 limits, are as follows: Minimum HDHP deductibles – $1,350 self-only coverage ($50 increase from 2017); $2,700 family coverage ($100 increase from 2017). HDHP out-of-pocket maximum limits – $6,650 self-only coverage ($100 increase from 2017); $13,300 family coverage ($200 increase from 2017). Annual HSA contribution limits – $3,450 self-only coverage ($50 increase from 2017); $6,900 family coverage ($150 increase from 2017). View Revenue Procedure 2017-37.

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