On December 22, 2017, President Donald Trump signed H.R. 1 (formerly known as the 2017 Tax Cuts and Jobs Act) into law; Congress passed the bill on December 20. The tax reform bill will be in effect from 2018 through 2025, and beyond. This piece of legislation affects many Americans and their benefits, including contributions to transit/commuter benefits and eliminates the individual mandate for health insurance. Below is a quick overview of how the tax reform bill affects two employee benefits:
In October 2017, the IRS released new contribution limits for 2018. The new monthly limits are:
- Parking – $260
- Mass Transit – $260
- Commuter vehicles – $260
- Bicycle – $20
However, unlike in previous years, in 2018 employers may no longer claim the business deduction for qualified mass transit and parking benefits unless it’s necessary for ensuring the safety of an employee. Employees can continue to enjoy the pre-tax benefit through employer-sponsored benefit accounts.
According to the Society for Human Resource Management (SHRM), the bicycle benefits are being treated differently:
“The legislation suspends the exclusion from gross income and wages for qualified bicycle commuting reimbursements for taxable years beginning after Dec. 31, 2017 and before Jan. 1, 2026. This means that employer reimbursements for bicycle commuting expenses are taxable and subject to payroll taxes and income tax withholding.”
SHRM concludes that this means some companies will stop subsidizing their employees’ mass transit and parking expenses. Nevertheless, employees may still contribute to a commuter/transit account.
Individual Mandate for Health Insurance
Another benefit affected by the new tax reform bill is health insurance. The individual mandate, which was put in place by the Affordable Care Act, will no longer apply beginning in 2019. That means people will no longer be required to carry health insurance or be taxed for not having coverage.
For those with a high deductible health plan (HDHP) and Health Savings Account (HSA), this will affect their ability to contribute to the HSA should they disenroll from the HDHP coverage. Enrollment in a qualified HDHP is a requirement to be able to make contributions to the HSA. Keep in mind, this will not affect a person’s ability to spend the HSA balance on eligible out-of-pocket expenses.
For more information about changes to your commuter benefits plan or your health insurance plan and HSA, contact HR or your benefits administrator.