employee benefits plan

19 Numbers You Need to Know for Your 2019 Employee Benefits Plan

Every year the benefits industry is inundated with a series of ever-changing numbers your employees must attempt to keep straight. Next year, due to the recent tax overhaul, there are even more numbers for your staff to remember.

But, luckily for you, The Olson Group is here to tell you what these numbers are and why they matter to you and your employees. In this article, we’ll tell you the 19 benefits numbers you need to know for your 2019 employee benefits plan. Below you’ll find these 19 employee benefits plan numbers separated into three categories. Numbers related to taxes, retirement and health benefits.

 

Tax Numbers to Know

1. Annual Exclusion for Gifts

The annual exclusion for gifts is the same for the calendar year 2019 as it was for last year at $15,000.

annual gift exclusion

2. Estate Tax Exclusion

Estates of decedents who die during 2019 will have a basic exclusion amount of $11,400,000. This total is an increase from last year’s total of $11,180,000 for estates of decedents who died in 2018.

 

3. Earned Income Credit

The maximum earned income credit amount for 2019 is $6,557 for taxpayers who are filing jointly or have three or more qualifying children. This amount is an increase from the 2018 limit of $6,431.

 

4. Tax Rates

There are seven tax rates for the 2019 tax year:

  • 37 percent for individual single taxpayers with incomes greater than $510,300 ($612,350 for married couples filing jointly)
  • 35 percent for incomes over $204,100 ($408,200 for couples)
  • 32 percent for incomes over $160,725 ($321,450 for couples)
  • 24 percent for incomes over $84,200 ($168,400 for couples)
  • 22 percent for incomes over $39,475 ($78,950 for couples)
  • 12 percent for incomes over $9,700 ($19,400 for couples)
  • 10 percent for single individuals with incomes of $9,700 or less ($19,400 for couples)

 

5. Standard Deduction

The standard deduction, for those married and filing jointly will rise to $24,400 for the tax year 2019, up $400 from 2018. For single taxpayers or married individuals filing separately, the standard deduction will rise to $12,200 for 2019, up $200 from the previous year. Finally, for heads of households, the standard deduction for 2019 will be $18,350, up $350 from 2018.

 

Retirement Numbers to Know

6. Pre-Tax Contribution Limits for 401(k)

The pre-tax contribution limits for employees who participate in a 401(k), 403(b), and most 457 plans increased for 2019 to $19,000. This number is an increase of $500 from the previous year. The new contribution limit also applies to the federal government’s Thrift Savings Plan.

retirement

7. Catch-Up Contribution Limits for 401(k)

Employees participating in a 401(k), and who are ages 50 and over, can contribute an additional $6,000 for 2019. This catch-up limit is the same as it was in 2018.

 

8. IRA Contribution Limits

Contribution limits for IRAs are being raised to $6,000 for 2019. Next year’s limit is an increase of $500 from the previous year and the first increase in contribution limits since 2013. Note: the catch-up contribution limit for people 50 and over will remain at $1,000.

 

9. Social Security COLA

Social security recipients will receive an increase of 2.8 percent as a cost-of-living adjustment, for 2019. This percentage marks the largest COLA increase since 2012. The estimated increase for the average social security beneficiary is $39 a month or $468 a year.

 

10. Maximum Monthly Payout

The maximum monthly amount a retired worker, at full retirement age, can make from social security is $2,861 for 2019. This is a monthly increase of $73 a month, or $876 a year from 2018.

 

 

Health Numbers to Know

11. Annual HSA Contribution Limit for Individuals

The annual health savings account contribution limit for individuals with single medical coverage in 2019 is $3,500. This represents a $50 increase from the previous year.

12. Annual HSA Contribution Limit for Families

For HSAs linked to family health coverage in 2019, the contribution limit is $7,000. An increase of $100 from 2018.

 

13. HDHP Minimum Deductible for Individuals

The minimum deductible for a qualifying high-deductible health plan will remain $1,350 for individual coverage. This amount is the same as it was last year.

 

14. HDHP Minimum Deductible for Families

Similarly, the minimum deductible for a qualifying high-deductible health plan for family coverage will remain the same for 2019 as it was for 2018, at $2,700.

 

15. HDHP Maximum Out-of-Pocket Amounts for Individuals

For those with individual coverage in 2019, the maximum limit for out-of-pocket costs will increase to $6,750. Up $100 from 2018. Note: Out-of-pocket costs include deductibles, copayments, and other amounts used for healthcare, but don’t include premiums.

 

16. HDHP Maximum Out-of-Pocket Amounts for Families

Out-of-pocket costs that don’t include premiums will have a maximum limit of $13,500 for family coverage. This is an increase of $200 from the previous year.

 

17. HSA Catch-Up Contributions

Those who are 55 years or older can contribute an extra $1,000 to their health savings account in 2019, the same as it was for 2018.

 

18. FSA Contribution Limit

The maximum contribution limit for a health flexible spending account is $2,700 for 2019. This marks an increase of $50 from the prior year. It’s important to note this increase also applies to limited-purpose FSAs, which are restricted to dental and vision care services, and can be used in tandem with HSAs.

 

19. No Penalty for a Lack of Health Coverage

The dollar amount used to determine the penalty for those not maintaining minimum essential health coverage is zero, per the tax overhaul passed in 2017. This penalty’s amount was $695 in 2018.

 

The Wrap

The employee benefits industry is a constantly evolving landscape. And ensuring your firm’s compliance is a must for every employer. As you traverse through the 2019 plan year, make sure to keep these 19 numbers in mind so you can make your best employee benefits plan possible.

trump tax plan

How Will the Trump Tax Plan Impact Your Employee Benefits?

By this point, you’ve likely already read, heard, or consumed some information regarding our country’s recent tax reform. But, in case you haven’t, here’s the skinny: On December 20, 2017, the Senate passed a tax reform bill which will have significant financial implications for our country, for years to come.

The reform, the first of its kind since 1986, was officially enacted beginning January 1, 2018. In addition to affecting finances across the nation, the Trump tax plan will also have a tangible impact on employee benefits plans.

 

What’s Not Changing?

There are five significant issues the final tax bill left unchanged. These issues are:

  1. Dependent Care FSAs – The final bill doesn’t eliminate Dependent Care FSAs, nor does it change the pre-tax treatment of employee contributions to these accounts.
  2. Tuition Reduction & Education Assistance – The bill doesn’t treat employer-provided education assistance as taxable income. Instead, this benefit stays tax-free to employees and a deductible to the employer.
  3. Adoption Assistance – Same as above.
  4. Medical Savings Accounts – The final act doesn’t change the favorable tax treatment of Medical Savings Accounts (MSAs)
  5. HSAs, Health FSAs, and the Cadillac Tax – The bill doesn’t change the tax treatment of HSAs or Health FSAs. Additionally, it doesn’t address the Cadillac Tax.

 

What’s Changing?

The Basics

The new tax plan keeps the seven tax brackets already in place but lowers tax rates across the board. Income levels will increase each year with inflation. Still, these levels will rise more slowly than in the past because they’re now linked to the chained consumer price index.

Income Tax Rate

Income Levels for Those Filing As:

2017 2018-2025 Single Married-Joint
10% 10% $0-$9,525 $0-$19,050
15% 12% $9,525-$38,700 $19,050-$77,400
25% 22% $38,700-$82,500 $77,400-$165,000
28% 24% $82,500-$157,500 $165,000-$315,000
33% 32% $157,500-$200,000 $315,000-$400,000
33-35% 35% $200,000-$500,000 $400,000-$600,000
39.6% 37% $500,000+ $600,000+

 

In addition to these lower tax rates, the new plan also doubles the standard deduction. For single filers, this deduction will jump from $6,350 to $12,000. Meanwhile, the deduction for Married-Joint filers increases from $12,700 to $24,000. Also, the new act eliminates the $4,150 personal exemption.

 

Business Taxes

The second, and arguably most compelling, impact the new tax reform will have is lowering the corporate tax. Under the new policy, the maximum corporate tax rate has been slashed from 35 to 21 percent. This number will be the lowest rate since 1939. Similarly, the tax plan raises the standard deduction, for pass-through businesses, to 20 percent.

taxes

It’s important to note these deductions will end after 2025. Additionally, the act limits companies’ ability to deduct interest expense to 30 percent of income. Finally, the bill retains tax credits for electric vehicles and electric farms, while cutting the sin taxes on beer, wine, and liquor.

 

Lessened Taxes, More Pay?

Because of the slashed corporate income tax, a slew of U.S. companies announced they’d be paying bonuses, giving raises to, or improving their benefits for employees. Some companies, such as Comcast and Bank of America announced they’d pay their employees a $1,000 bonus.

Similarly, other firms like BNY Mellon and CVS announced they’d be increasing their minimum hourly pay rate. Still, it’s important to know these bonuses or pay increases are entirely subject to the employer’s discretion. Of the S&P 500, only around 50 firms have increased pay, benefits, or given a bonus to employees because of the tax overhaul.

 

Individual Mandate

One of the most important impacts the tax reform will have on employee benefits is the elimination of the individual insurance mandate. This individual mandate, part of the ACA, monetarily penalized Americans who didn’t carry health insurance. Eliminating this penalty, according to the Congressional Budget Office (CBO), will save the government $318 billion over the next ten years.

medical records

Though it’s worth noting, without the individual mandate, it’s likely there will be a steady increase in premiums over the next decade. Similarly, changing the penalty is expected to result in 13 million more uninsured Americans by 20217. But the employer mandate is still very much in effect, which makes 1094-C and 1095-C reporting necessary.

 

Commuting Benefits

In 2017, employee transit benefit programs allowed employees to use pretax dollars to get to and from work. These programs also allowed employers to deduct contributions for:

  • $255 per employee per month in transportation expenses
  • $255 per employee per month in parking expenses
  • $20 per employee per month for biking-related costs

The new tax bill eliminates deductions for qualified mass transit and parking benefits. Though, there’s an exception for instances where the benefit is necessary for the safety of an employee. And these remaining benefits will still be tax exempt for employees. But employers are no longer permitted to deduct contributions to these benefits from their corporate income taxes.

 

Moving Expenses

Previously, employers could pay for a worker’s moving expenses due to a new job or relocation. And, the amount paid wasn’t taxable to the employee. Now, the value of the moving benefit is included as taxable income for the employee. Additionally, the deduction for these expenses has also been eliminated for individual taxpayers.

moving expenses

It’s worth noting, moving expenses will remain tax-free for members of the military who are on active duty or move under military order. So, if employers don’t want to shift the costs of moving to their staff, they’ll have to bear these expenses themselves.

 

Paid Leave Credit

The bill also creates a tax credit for employers who provide paid family and medical leave. Applicable employers can receive a business credit equal to a percentage of wages paid to qualified employees on leave under the Family and Medical Leave Act (FMLA).

There are specifics an employer must prove to receive credit. To earn this credit, an employer must:

  • Have provided at least two weeks of leave; and
  • Compensate their workers a minimum of 50 percent of their regular earnings

The credit will range from 12.5 to 25 percent of the cost of each hour of paid leave provided. The government will cover 12.5 percent of the benefit’s costs if the employee receives half of their regular earnings. This percentage rises to 25 percent if the worker receives their entire regular earnings.

It’s also important to know there’s a stipulation to receiving this tax credit. Employers will only be able to apply for the credit for employees who earn less than $72,000 per year. Any worker making more than $72,000 a year is ineligible for this tax credit.

 

Employee Awards

Something else the new legislation does is define what can be given as a tax-free achievement award. Now, there are specific awards, considered ‘tangible personal property,’ which aren’t considered taxable income to the employee and cannot be characterized as a business expense by the employer.

The awards considered ‘tangible personal property’ include:

  • Cash
  • Cash equivalents
  • Gift cards
  • Gift certificates
  • Vacations
  • Meals
  • Lodging
  • Tickets to theater or sporting events

 

The Wrap

It’s still too early to tell whether the cumulative effects of this reform will be a net positive for business owners. But continue to check back here for more updates regarding tax reform, as they’re released. We will keep you informed about the Trump tax plan and how it will affect employee benefits and your business as a whole.

tax reform - senate

How New Tax Reform Will Affect Employee Benefits

On December 20, 2017, the Senate passed a tax reform bill that will have significant financial implications for the country. The reform, the first of its kind since 1986, will add $1.46 trillion to the national debt over the next ten years. And while this bill won’t affect anyone’s 2017 taxes, it will affect employee benefits over the coming years.

According to the Society for Human Resource Management (SHRM), tax reform will impact employee benefits plans through multiple facets. It remains to be seen whether this impact will be a net positive or negative. But it will have a significant impact nonetheless.

 

Read more about how tax reform will impact your employee benefits

 

Tax Reform and Employee Benefits 

Individual Mandate

The first, and arguably most important, impact the tax reform will have on benefits, is the change to the individual insurance mandate to from 2.5 to zero percent. The individual mandate, part of the ACA, penalized Americans who don’t carry health insurance.

Changing this penalty, according to the Congressional Budget Office (CBO), will save the government $338 billion over the next decade. Its impact on health premiums across the board may counteract these savings. But the change of this penalty is likely to result in an estimated 13 million more uninsured Americans by 2027.

health care policy

Similarly, according to the CBO, changing this penalty could lift premiums in the individual marketplace, by an estimated 10 percent. Note: It’s important to highlight that this is a change in the mandate and not a repeal. This change means a future Congress can change the penalty back to what it previously was, or even increase the amount, in the future.

 

Commuting Benefits

In 2017, employee transit benefit programs allow employees to use pretax dollars to get to and from work. These programs also allow employers to deduct contributions of:

  • $255 per employee per month in transportation expenses
  • $255 per employee per month in parking expenses
  • $20 per employee per month for biking-related expenses

commuter benefits

The new tax bill eliminates deductions for qualified mass transit and parking benefits. Note there is an exception for instances where the benefit is necessary for the safety of an employee. But these benefits will still be tax exempt for employees. It is employers who will be subject to the tax on unrelated business income for any qualified transportation benefits.

 

Paid Leave Credit

On a (potentially) more positive note, the bill also creates a tax credit for employers who provide paid family and medical leave. Applicable employers can receive a business credit equal to a percentage of wages paid to qualified employees on leave under the Family and Medical Leave Act (FMLA).

There are specifics an employer must prove to receive the credit. To earn this credit, an employer must:

  • Have provided at least two weeks of leave; and
  • Compensate their workers a minimum of 50 percent of their regular earnings.

The credit will range from 12.5 to 25 percent of the cost of each hour of paid leave provided. The government will cover 12.5 percent of the benefit’s costs if the employee receives half of their regular earnings. This percent rises up to 25 percent if the worker receives their entire regular earnings.

Still, it’s important to know there is a stipulation to receiving this tax credit. Employers will only be able to apply for the credit for employees who earn less than $72,000 per year.

 

Moving Expenses

Previously, employers could pay for a worker’s moving expenses due to a new job or relocation. And, the amount paid wasn’t taxable to the employee. Now, the value of the moving benefit is included as taxable income for the employee. Additionally, the deduction for these expenses has also been eliminated for individual taxpayers.

It’s worth noting, moving expenses will remain tax-free for members of the military who are on active duty or move under to military order. So, if employers don’t want to shift the costs of moving to their staff, they’ll have to bear these expenses themselves.

 

Employee Awards

Something else the new legislation does is to define what can be given as a tax-free achievement award. Now, there are specific awards, considered ‘tangible personal property,’ that isn’t considered taxable income to the employee and cannot be characterized as a business expense by the employer.

The awards considered ‘tangible personal property’ include:

  • Cash
  • Cash equivalents
  • Gift cards
  • Gift certificates
  • Vacations
  • Meals
  • Lodging
  • Tickets to theater or sporting events

 

The Wrap

It’s also important to know the bill cuts the corporate tax rate from 35 to 21 percent. Obviously, this cut should be a boon to business. But we still don’t know if this tax reform will be a net positive or negative for business owners. As detailed above, there is also a possibility these effects have a negative impact on your organization by adversely affecting employee benefits.

For business owners, it’s too soon to tell what the cumulative effects of this reform will be. Check back here for more updates regarding tax reform, as they are released. We will keep you informed about this bill and how it will affect employee benefits and your business as a whole.