2019 ACA-related cost-of-living adjustments available

Cost-of-living adjustments (COLAs) applicable to 2019 are available for a wide variety of tax limits, including many related to provisions of the Affordable Care Act. Let’s look at some highlights that are related to health care benefits provided by employers.

Savings accounts

Some COLAs affect health-care-related savings accounts. For example, the dollar limit on employee salary reduction contributions to health Flexible Spending Accounts has been raised from $2,650 to $2,700.

Meanwhile, the maximum amount of payments and reimbursements under a qualified small employer Health Reimbursement Arrangement are $5,150 for self-only coverage and $10,450 for family coverage (up from $5,050 and $10,250, respectively).

Amounts have also changed for high-deductible health coverage compatible with Archer Medical Savings Accounts as well. This year, the annual deductible for self-only coverage must not be less than $2,350 (up from $2,300) or more than $3,500 (up from $3,450), with an out-of-pocket maximum of $4,650 (up from $4,550). For family coverage, the annual deductible must not be less than $4,650 (up from $4,550) or more than $7,000 (up from $6,850), with an out-of-pocket maximum of $8,550 (up from $8,400).

Dependent care

Although the $5,000/$2,500 limit for Dependent Care Assistance Plans (DCAPs) hasn’t changed (it’s not indexed for inflation), there are adjustments to some of the general tax limits relevant to the federal income tax savings under a DCAP.
Examples include the 2019 tax rate tables, earned income credit amounts and standard deduction amounts. The child credit limits are also relevant when calculating the federal income tax savings from claiming the dependent care credit vs. participating in a DCAP.

Tax credits

There have been COLAs made to the small business health care credit. The average annual wage level at which the credit begins to phase out for eligible small employers will be $27,100 (up from $26,600). The maximum average annual wages to qualify for the credit as an “eligible small employer” for 2019 will be twice this amount: $54,200 (up from $53,200).

Adjustments have also been made to the premium tax credit, which is available to qualifying individuals and families who buy health care coverage through a Health Insurance Marketplace (commonly known as an “exchange”). For taxable years beginning in 2019, the following limitations on the tax for excess advance credit payments will apply to unmarried individuals (other than surviving spouses and heads of households):

  • $300 for household incomes less than 200% of the federal poverty line (FPL),
  • $800 for household incomes at least 200% but less than 300% of FPL, and
  • $1,325 for household incomes at least 300% but less than 400% of FPL.

For all other taxpayers, the limits are:

  • $600 for household incomes less than 200% of FPL,
  • $1,600 for household incomes at least 200% but less than 300% of FPL, and
  • $2,650 for household incomes at least 300% but less than 400% of FPL.

This tax is imposed if a taxpayer’s advance premium tax credit payments for health insurance bought through a Health Insurance Marketplace for a year exceed the allowed credit.

Applying the changes

If your organization offers benefits with limits that are changing, you’ll need to determine whether your plan automatically applies the latest limits or must be amended to recognize the changes. Be sure to communicate any changes to employees.

© 2019

Published in Healthcare

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