Employees will be able to contribute up to $2,650 to a health flexible spending account (FSA) in 2017, a $50 increase from the 2017 amount, the Internal Revenue Service (IRS) announced in Revenue Procedure 2017-58.
The IRS is raising to $110,000 (from $105,000) the annual compensation that makes a company’s officer a “control employee” (for fringe benefit valuation purposes, the IRS announced separately in Notice 2017-64. The control employee threshold for commuting valuation purposes increases from $215,000 to $220,000.
However, the bar for “highly compensated employee” under Section 414(q)(1)(B) is unchanged at $120,000, and the dollar limit that defines a “key employee” in a top-heavy plan remains $175,000.
The year 2018 will see higher thresholds for adoption-related tax credits and exclusions. Rev. Proc. 2017-58 raises to $13,840 (from $13,570) the income exclusion and tax credit for qualifying adoption-related expenses. The income threshold at which the credit begins to be phased out now will be $207,580, vs. $203,540 in 2017.
The monthly limits on the qualified transportation fringe benefit, as well as the qualified parking benefit, also are being raised to $260, up from $255 in 2017. Congress enacted permanent parity between these two in December 2015.
Rev. Proc. 2017-58 raises the long-term care (LTC) insurance premium amounts that will be deductible in 2017. These will range from $420 for taxpayers aged 40 or younger, to $5,200 for those older than 70. The per diem limitation on LTC insurance payments remains $360.
The annual limit on payments and reimbursements under a qualified small employer health reimbursement arrangement was raised to $5,050 for self-only and $10,250 for family coverage, an increase of $100 and $250, respectively, from 2017 levels.
The 2018 contribution limits for health savings accounts (HSAs), along with the adjusted minimum deductibles and maximum out-of-pocket limits for HSA-eligible high-deductible health plans, were announced earlier this year.