New Fiscal Cliff Legislation Affects Benefits Plans
1/2/2013 12:25 PM
On January 12, 2013, the House of Representatives passed the American Taxpayer Relief Act (ATRA) of 2012. This so-called “Fiscal Cliff” legislation is intended to avert the negative economic effects resulting from the Budget Control Act of 2011.
With the passage of this fiscal cliff legislation, Congress also addresses a few outstanding issues affecting employee benefits:
- Parity with parking benefits for employer-provided mass transit and vanpool benefits
This legislation increases the monthly exclusion for employer-provided transit and vanpool benefits from $125 to $240 through 2013, matching the exclusion for employer-provided parking benefits. The ruling should be retroactive to months after December 31, 2011 and awaiting IRS clarification.
- Permanently extend adoption tax credit increases and the adoption assistance programs exclusion
Participants that adopt children can receive a tax credit for qualified adoption expenses and also exclude from income any adoption expenses paid by an employer. The bill extends for taxable years beginning after December 31, 2012, the increased adoption credit amount and the exclusion for employer-assistance programs created by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA).
EGTRRA increased the credit from $5,000 ($6,000 for a special needs child) to $10,000, and provided a $10,000 income exclusion for employer-assistance programs. The Patient Protection and Affordable Care Act of 2010 extended these benefits to 2011 and made the credit refundable.
- Permanently extend the expanded exclusion for employer-provided educational assistance
A participant may exclude up to $5,250 from their taxable income per year for employer-provided education assistance. Prior to 2001, this incentive was temporary and only applied to undergraduate courses. EGTRRA expanded this provision to graduate education and extended the provision for undergraduate and graduate education.
ATRA extends the changes to this provision for taxable years beginning after December 31, 2012.
These legislative changes help CommuteEase and BESTflexSM
Plan participants make better use of their benefit plans.
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