BeneFLEX Education Reimbursement Accounts
Reimbursement Available for:
- Graduate Classes
- And More
Fiscal Cliff Legislation Resolves a Wide Range of Benefit Issues
After weeks of difficult negotiations, Congress passed the American Taxpayer Relief Act (H.R.8) on January 1, 2013, to address key elements of the looming fiscal cliff – the combination of tax increases and spending cuts that would have begun January 1, 2013. While the legislation extends the Bush tax cuts for most taxpayers and eliminates the payroll tax reduction of the past few years for working Americans, the law also includes important provisions related to health care.
Educational assistance, adoption assistance and dependent care assistance benefits.
The Act permanently extends the exclusion for employer-provided educational assistance under Internal Revenue Code Section 127, which allows taxpayers to exclude up to $5,250 annually in qualified tuition assistance for undergraduate and graduate education.
The exclusion for employer-provided adoption assistance was also made permanent. The limits (indexed) enacted by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) will apply. The maximum amount (dollar limit) for 2015 is $13,400 per child.
The EGTRRA increased the annual dollar limit on creditable expenses for the dependent care tax credit, increased the credit rate and raised the income level at which the credit phases out. Under the tax code, employees may exclude up to $5,000 in employer-provided dependent care assistance, but the exclusion may not exceed the lesser of the employee’s earned income or that of the spouse. The Job Creation and Worker Assistance Act amended the EGTRRA to increase the amount of deemed earned income for spouses who are full-time students or unable to care for themselves. These provisions are permanently extended.
This permanent extension removes uncertainty for employers about these benefits – often they have sunset every year or two and require last-minute (or retroactive) attention from Congress.