IRS, SSA Adjust Benefits Thresholds for 2021

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Employees will be able to contribute up to $2,750 to a health flexible spending account (FSA) in 2021, the same as in 2020, the Internal Revenue Service (IRS) announced in Revenue Procedure 2020-45. However, changes were made to certain other benefits thresholds and limits.

The IRS is raising to $235,000 (from $230,000) the annual compensation that makes a company’s employee, other than an officer, a “control employee” for commuting valuation purposes, the IRS announced separately in Notice 2020-79.

For officers, the control employee threshold remains at $115,000. The threshold that defines “highly compensated employee” under Section 414(q)(1)(B) will still be $130,000, and the dollar limit that defines a “key employee” in a top-heavy plan stays at $185,000.

The year 2021 will see higher thresholds for adoption-related tax credits and exclusions. Rev. Proc. 2020-45 raises to $14,440 (from $14,300) 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 $216,660, vs. $214,520 in 2020.

The monthly limits on the qualified transportation fringe benefit, as well as the qualified parking benefit, will still be $270 in 2021. Congress enacted permanent parity between these two in 2015.

Rev. Proc. 2020-45 raises certain long-term care (LTC) insurance premium amounts that will be deductible in 2021. The limit is raised to $450 (from $430) for taxpayers aged 40 or younger, and the amounts increase for the other age groups as well, to a maximum of $5,640 for those older than 70. The per diem limitation on LTC insurance payments also increases, from $380 to $400.

The annual limit on payments and reimbursements under a qualified small employer health reimbursement arrangement is raised to $5,300 for self-only and $10,700 for family coverage, an increase of $50 and $100, respectively, from 2020 levels…..

Source: HR Daily Advisor

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