ACA: 2017 Cost of Living Adjustments
On October 25 and 27, 2016, the IRS released cost of living adjustments for 2017 under various provisions of the Internal Revenue Code (the Code). Some of these adjustments may affect your employee benefit plans.
For plan years beginning in 2017, the dollar limitation under Section 125 for voluntary employee salary reductions for contributions to health flexible spending arrangements increases to $2,600.
The Affordable Care Act (ACA) amended Section 125 to place a $2,500 limitation under Section 125(i) on voluntary employee salary reductions for contributions to health flexible spending arrangements, subject to inflation for plan years beginning after December 31, 2013.
Requirement To Maintain Minimum Essential Coverage
For calendar year 2017, the applicable dollar amount used to determine the penalty under Section 5000A(c), for failure to maintain minimum essential coverage is $695. This is also referred to as the individual mandate under the ACA. Any assessed penalty tax is the greater of $695 or 2.5% of modified adjusted gross income in excess of the filing threshold and capped at the average premium amount for bronze coverage available on the health insurance exchange. The penalty is collected from an individual’s tax refund due after filing their personal income tax return with the IRS.