In December 2017, the Tax Cuts and Jobs Act was signed into law, enacting tax reform provisions that will be in effect from 2018 through 2025 (and beyond). Among other areas, the legislation impacts employee benefits directly in two areas – transit/commuter benefits and the individual health insurance mandate required by the Affordable Care Act (ACA).
Commuter Benefits
Starting in 2018, employers may no longer claim the business deduction for qualified mass transit and parking benefits unless the benefit is necessary for ensuring the safety of an employee. Employees can continue to enjoy the pre-tax benefit through employer-sponsored benefit accounts.
Editor’s Note: Commuting/Transit contribution limits are set each calendar year by the IRS. For 2021, they are $270 per month for qualified Parking expenses and $270 per month for qualified Commuting expenses. Qualified Parking expenses include parking at or near your place of employment or at a location from which you commute to work. Qualified Commuting expenses include bus, train, subway, ferry, and vehicle pool fares and passes.
According to the Society for Human Resource Management (SHRM), the 2017 Tax Cuts and Jobs Act also affects bicycle benefits:
“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.”
Individual Mandate for Health Insurance
Another benefit affected by the 2017 Tax Cuts and Jobs Act is health insurance. The individual mandate put into place by the ACA will no longer apply beginning in 2019. That means people are no longer required to obtain health insurance coverage and will not be taxed if they do not carry any.
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 their existing 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.
DataPath, Inc. is a leading provider of technology solutions for cloud-based benefits administration.