Earlier this year, the IRS extended retroactively for 2014 a measure that increases the maximum monthly exclusion amount for mass transit passes and van pool benefits from $130/month to $250/month. This change was made so that these transportation benefits matched the $250/month exclusion for qualified parking benefits. This provision expired at the end of 2014. The recently signed Protecting Americans from Tax Hikes Act of 2015 (the “PATH Act”) extended numerous tax provisions that had expired, including the mass transit and parking benefit exclusions. The Act includes a retroactive extension to the beginning of this year. So, for 2015 the maximum exclusion is $250 monthly for both transit and parking, subject to cost-of-living adjustments in 2016. The PATH Act extends this equity permanently. Note that the 2016 the cost-of-living-adjustment increased the maximum exclusion to $255 monthly. Retroactive increases can be a challenge. Affected employers preparing their 2015 W-2s should take this change into consideration. Employees then will need to make sure their personal tax returns reflect the update. Congress has addressed this by stating that expenses incurred in 2015 by an employee for employer-provided qualified benefits may still be reimbursed (on a tax-free basis) to the extent they exceed $130 per month and are no more than $250 per month. Nyhart recommends that employers should obtain the help of qualified tax advisors to assist with the details provided in the Act.
Update: IRS Notice 2016-6 issued on January 11, 2016, provided more guidance for employers on how to actually apply the transit benefit adjustments for 2015.
Recent guidance issued by the IRS on qualified small employer HRAs (“QSEHRA”)...READ MORE