The IRS recently announced the 2008 cost-of-living adjustments to various limits for transportation benefits, adoption assistance benefits, the Saver’s Tax Credit for certain qualified retirement plan contributions, and Archer Medical Savings Accounts (MSAs), among other benefit limits. Employers should inform employees of these increases, if necessary and applicable.
The 2008 increases include the following:
- Saver’s Tax Credit: Certain low-income individuals are eligible for a tax credit if they contribute to a 401(k) plan (or certain other qualified retirement plans or IRAs). The credit applies only to individuals with an adjusted gross income not exceeding: (a) $53,000 (for married joint filers); (b) $39,750 (for head of household filers); or (c) $26,500 (for all other filers, including single filers).
- Adoption Assistance Program/Adoption Credit: $11,650 will be the maximum amount that may be excluded from an employee’s gross income under an employer-provided adoption assistance program. This exclusion begins to phase out for individuals with modified adjusted gross income greater than $174,730 and is completely phased out for individuals with modified gross income of $214,730. Similarly, the maximum adoption credit allowed will be $11,650.
- Qualified Transportation Fringe Benefits: The monthly limit for qualified parking benefits will be $220, and the monthly combined limit for transit and vanpooling expenses will be $115.
- Archer MSAs: The 2008 parameters for Archer MSA-compatible high-deductible health coverage have increased. For self-only coverage, the annual deductible must not be less than $1,950 or more than $2,900, with an out-of-pocket maximum of $3,850. For family coverage, the annual deductible must not be less than $3,850 or more than $5,800, with an out-of-pocket maximum of $7,050.