Friday, November 3, 2023



Charles C. Shulman, Esq.
212-380-3834 201-357-0577






Qualified Plan Adjustments

402(g) Deferral Limit – Annual limit on pre-tax salary deferrals to 401(k), 403(b) and 457(b) plans – IRC §§ 402(g)(1), 402(g)(3) & 457(e)(15)



Age 50 Additional Catch-Up Deferrals – Age 50 & older “catch-up” deferrals beyond the 402(g) limit above available for 401(k), 403(b), & governmental 457(b) plans – IRC § 414(v)(2)(B)(i). 
Under the SECURE 2.0 Act of 2022 (SECURE 2.0) § 603 the catch-up for highly-compensated employees (in the previous year) to a qualified plan (401(k), 403(b) & 457(b)) will need to be Roth contributions beginning in 2026. Also, under SECURE 2.0 § 109 the catch-up for those ages 60-63 will be increased about 50% in 2025.



DB Benefit Limit – Limit on annual benefits from defined benefit plans – IRC § 415(b)



DC Contribution Limit – Annual contribution limit for defined contribution plans – IRC § 415(c)



Compensation Limit – Annual compensation limit for qualified plans and SEPs IRC §§ 401(a)(17), 404(l) & 408(k)



Grandfathered § 401(a)(17) annual compensation limit for governmental plans in effect on July 1, 1993 – Treas. Reg. § 1.401(a)(17)-1(d)(4)(ii)



Highly Compensated Employee - Highly compensated employee threshold for nondiscrimination testing in the following year – IRC § 414(q)(1)(B)





Key Employee Officers in Top Heavy Plan – Key employee threshold for officers in top heavy plans – IRC § 416(i)(1)(A)(i)



QLAC Limit – Limit on premiums for qualified longevity annuity contracts (QLACs) under Treas. Reg. § 1.401(a)(9)-6 Q&A 17 increased from $150,000 to $200,000 under SECURE 2.0 § 202 for contracts purchased or received on or after Dec. 29, 2022





ESOP Distributions – (i) minimum account balance allowing extension of distribution period beyond 5 years; and (ii) dollar amount (or fraction) in excess of minimum account balance allowing extension of distribution period for additional year – IRC § 409(o)(1)(C)(ii)

(i) $1,330,000

(ii) $265,000

(i) $1,380,000

(i) $275,000

SEP & SIMPLE Adjustments

SEP Earnings Level – Minimum earnings level to qualify for Simplified Employee Pension (SEP) IRA – IRC § 408(k)



SIMPLE Salary Deferral Limit – SIMPLE 401(k) or SIMPLE IRA elective deferral limit – IRC § 408(p)(2)(E) (referenced by § 401(k)(11)(B)(i)(I))



SIMPLE Catch-Up for Age 50 – SIMPLE 401(k) or SIMPLE IRA age 50 catch-up IRC § 414(v)(2)(B)(ii). Under SECURE 2.0 beginning in 2024 the SIMPLE catch-up is supposed to increase by 10%. Also, under SECURE 2.0 § 109 the catch-up for SIMPLE plans for those ages 60-63 will be increased about 50% in 2025.



Traditional IRA & Roth IRA Adjustments

IRA Limit – Traditional IRA and Roth IRA contribution limit is indexed – IRC §§ 219(b)(5)(A), 408(a)(1) & 408A(c)(2)



Spousal IRA Contribution Limit – A spousal IRA or spousal Roth IRA where both spouses contribute is double the above.



IRA Catch-up Contribution - Age 50 & older “catch-up” for IRAs & Roth IRAs (not currently adjusted but under SECURE 2.0 § 108 will adjust beginning in 2025) – IRC § 219(b)(5)



Phaseout where IRA Owner is also Covered by an Employer Plan – Adjusted gross income (AGI) phase-out of deductible contribution to IRA if individual is also covered by employer-sponsored retirement plan for: (i) married filing jointly, (ii) single or (iii) married filing separately – IRC § 219(g)(1)-(5)

(i) $116,000 - $136,000, (ii) $73,000 - $83,000, (iii) 0 - $10,000

(i) $123,000 - $143,000, (ii) $77,000 - $87,000, (iii) 0 - $10,000

Phaseout where Spouse of IRA Owner is Covered by an Employer Plan – AGI phase-out of deductible contribution to IRA if contributor is not covered by an employer-sponsored plan but spouse is covered by an employer-sponsored plan – IRC § 219(g)(7)

$218,000 - $228,000


Phaseout of Roth IRA Contributions – AGI phase-out deduction for contributions to the Roth IRA for (i) married filing jointly, (ii) single or (iii) married filing separately – IRC § 408A(c)(3)(B)

(i) $218,00 - $228,000, (ii) $138,000 - $153,000, (iii) 0 - $10,000

(i) $230,000 - $240,000, (ii) $146,000 - $161,000, (iii) 0 - $10,000

Saver’s Credit – A “saver’s credit” under IRC § 25B(b) provides a tax credit for salary deferrals to a 401(k) or 403(b) plan or contributions to an IRA for those with AGI below a certain level, with a credit (for married filing jointly) of (i) 50% of contribution if AGI is not more than a specified dollar amount, (ii) 20% if AGI is in a specified dollar range and (iii) 10% if AGI is in higher specified dollar range. Single and married filing separately have lower limits. (Effective for plan years beginning 2027, SECURE 2.0 § 103 sunsets the § 25B saver’s credit and replaces it with a federal matching contribution under IRC § 6433, which is 50% of the contributions up to $2,000 per individual, but phases out if AGI is between $41,000 and $71,000 for married filing jointly, and $20,500 to $35,500 for single taxpayers and married filing separate returns.)

(i) $43,500, (ii) $43,501- $47,500, (iii) $47,501 - $73,000

(i) $46,000, (ii) $46,001- $50,000, (iii) $50,001 - $76,500

PBGC Premium and Guaranty Adjustments

PBGC Flat-Rate Premium – PBGC flat-rate premium per participant for a single-employer plan (under ERISA § 4006 & PBGC Premium Rates webpage)



PBGC Variable-Rate Premium - PBGC variable-rate premium for single-employer plans (i) per $1,000 of Unfunded Vested Benefits, and (ii) per participant cap.  SECURE 2.0 § 349 will increase in 2025 the variable rate $52 per participant x $1000 of UVBs so that the $52 amount is indexed for inflation.

(i) $52
(ii) $652

(i) $52

(ii) $686

Multiemployer Premium - PBGC premium for multiemployer plan per participant



PBGC Guaranteed Benefit - PBGC guaranteed benefits under ERISA § 4022 where PBGC is the trustee (for annual single life annuity beginning at age 65)

($6,750 a month)


($7,107.95 a month)

FSA, HRA, HSA, and ACA Adjustments

Health FSA Limit – Health FSA (flexible spending account) limit – IRC § 125(i)



Heath FSA Carryover – Health FSA carryover amount



HRA Contribution Limit – Health Reimbursement Account (HRA) maximum employer contribution – Treas. Reg. § 54.9831-1(c)(3)(viii)(B)



HSA Limit – Health Savings Account (HSA) deduction limit for (i) single & (ii) family – IRC § 223(b)(2)

(i) $3,850

(ii) $7,750

(i) $4,150

(ii) $8,300

HDHP Deductible – HDHP (with HSA) minimum deductibles for (i) self-only or (ii) family coverage – IRC § 223(c)

(i) $1,500

(ii) $3,000

(i) $1,600

(ii) $3,200

HDHP Out of Pocket – HDHP (with HSA) maximum out-of-pocket amounts for (i) self-only & (ii) family coverage – IRC § 223(c)

(i) $7,500

(ii) $15,000

(i) $8,050

(ii) $16,100

QSEHRA Limit – Qualified small employer HRA (QSEHRA) for small business (less than 50 employees) and the maximum payments and reimbursements (i) single coverage and (ii) family coverage – IRC § 9831(d)

(i) $5,850

(ii) $11,800

(i) $6,150

(ii) $12,450

MSAs – Existing Archer Medical Savings Accounts have annual deductible range (i) for single coverage & (ii) for family coverage, and out-of-pocket maximum (iii) for single coverage and (iv) for family coverage – IRC § 220(c)(2)(A)

(i)  $2,650 - $3,950, (ii) $5,300 - $7,900, (iii) $5,300,
(iv) $9,650

(i) $2,800 - $4,150,
(ii) $5,550 - $8,350, 
(iii) $5,550,
 (iv) $10,200

ACA Out of Pocket Maximum – Affordable Care Act (ACA) out-of-pocket maximum (cost-sharing) for non-grandfathered group health plans for (i) self & (ii) family – 42 USC § 18022(c); 45 CFR § 156.130(a)

(i) $9,100

(ii) $18,200

(i) $9,450

(ii) $18,900

ACA Affordability Rate – ACA health plan “affordability” rate of pay (percentage of household income) for premium tax credit – IRC § 36B(c)(2)(C)(i)(II)



ACA Pay or Play Penalties – ACA employer shared responsibility assessments (i) if do not offer coverage to 95% of full-time employee, penalty for each FTE; and (ii) if do offer coverage to 95% of FTEs but is not “affordable” penalized only for employees who buy Marketplace coverage and receive premium tax credit – IRC § 4980H

(i) $2,880

(ii) $4,320

(i) $2,970

(ii) $4,460

Fringe Benefit Adjustments

Transportation Fringe – Qualified transportation & parking benefit – IRC § 132(f)(2)



Adoption – Adoption credit or exclusion from income (i) amount and (ii) AGI phaseout – IRC §§ 23(a)(3) & 137(a)(2)

(i) $15,950,
(ii) $239,230 - $279,230

(i) $16,810,
 (ii) $252,150 - $292,150

LTC Deduction Limit – Long-term care premium deduction limits for individuals (i) age 40 or less, (ii) age 41-50, (iii) age 51-60, (iv) age 61-70 and (v) over age 70 – IRC § 213(d)(10)

(i) $480, (ii) $890,
(iii) $1,790, (iv) $4,770 & (v) $5,960

(i) $470, (ii) $880, (iii) $1,760, (iv) $4,700 & (v) $5,880

Social Security Adjustments

Taxable Wage Base – the taxable wage base subject to FICA (OASDI) tax (SSA Oct. 2023 COLA Fact Sheet)



SS Tax up to Taxable Wage Base – Social Security (OASDI) tax up to taxable wage base (double for self-employed)



Medicare Tax – Medicare tax and no cap on wages (plus 0.9% Medicare tax for wages in excess of $250,000 (joint filers) / $200,000 (single))



SS COLA – Social Security cost of living increase



Sample Penalty Adjustments

DOL Penalties – Sample DOL penalties per day for
(i) failure to file annual report (Form 5500) - ERISA § 502(c)(2) (originally $1,000 per day), or
(ii) failure to provide blackout or diversification notice – ERISA § 502(c)(7) (originally $100 per day)

(i) $2,586

(i) $164





Thursday, June 1, 2023

Affordable Care Act Employer Mandate Penalties and Solutions, Individual Coverage HRAs and Health Plan Nondiscrimination Rules


Affordable Care Act Employer Mandate Penalties and Solutions, Individual Coverage HRAs and Health Plan Nondiscrimination Rules

212-380-3834 / 201-357-0577 (blog)

The IRS has been issuing preliminary penalty calculations to employers relating to the Affordable Care Act Employer Shared Responsibility Mandate (the "Employer Mandate"). The following is a review of the issues and solutions for employers regarding the Employer Mandate, interaction with new individual coverage HRAs (ICHRAs), health plan nondiscrimination rules and related issues

1. Family Health Coverage Must be Offered to Substantially all Full Time Employees – But Most of the Premiums Can be Shifted to the Employees

          a. Penalty on Each Full-Time Employee if Family Coverage not Offered to 95% of FTEs. Under the Employer Mandate rules contained in the Patient Protection and Affordable Care Act of 2010 (the "ACA"), if an employer employs 50 or more "full-time employees," i.e., employees for 30+ hours a week on average, it must offer family health insurance coverage that meets the "minimum essential coverage" standards of the ACA to 95% or more of their full time employees. If it does not offer the family health insurance coverage to 95% of the full-time employees there would be a significant penalty under Code § 4980H(a) of $2,880 a year (for 2023) for each full time employee (minus the first 30 employees) even for those who have been offered or enrolled in the group health plan.

          b. Coverage to 95% of FTEs Must Offer Minimum Essential Coverage. In order to avoid this significant penalty, an employer must offer to substantially all (95%) of the full-time employees health insurance coverage that meets the "minimum essential coverage" standards of the ACA or an individual coverage HRA (which is considered sufficient even without minimum essential coverage). However, as the rule is currently written, it should be permitted to shift the bulk of the premiums to the employees, because as long as it offers family health coverage, the coverage does not have to be "affordable." 

          c. ICHRA Considered Offering of Coverage. With regard to individual coverage HRAs, the IRS, DOL and HHS FAQs on New Health Coverage Options for Employers and Employees, Q:7 states that: "An offer of an individual coverage HRA discussed below counts as an offer of coverage under the employer mandate." Under 2019 regulations, those who are offered group coverage cannot also be reimbursed for individual premiums, but the 95% rule can be satisfied by offering, e.g., one identifiable group with individual coverage HRAs and the other identifiable group with group health coverage.

          d. If Offered to 95% but the Coverage is not Affordable, a Smaller Penalty Would be Imposed (i.e., Only for the Number of FTEs receiving Exchange Coverage and a Premium Tax Credit). Even if 95% are offered group coverage (or an individual coverage HRA), it would not be considered "affordable" if the employees have to pay the bulk of the premiums. Thus, there would be a smaller penalty of $4,320 (for 2023) under Code § 4980H(b) for any full-time employees who, because the premiums are so high, buys individual Marketplace Exchange coverage and is entitled to a premium tax credit for all or a portion of cost of the Exchange premium. This penalty is not based on all employees but only on those employees who opt for Exchange coverage and receive a premium tax credit. In our experience only a minority of employees purchase their insurance through the Marketplace Exchange (especially in urban areas), because so few hospitals and doctors accept marketplace insurance. Thus, as long as 95% of the employees with 30+ hours a week are offered family coverage (even on an employee-pay-all basis), the penalty is likely to be very minor.

2. Report if Family Group Coverage was Offered to All Full Time Employees on Annual Form 1095-C to be given to Employees and Annual Form 1094-C to be Filed with the IRS

An employer or affiliated group with 50 or more full-time employees must provide the employees who were eligible for group health insurance an annual IRS Form 1095-C indicating which months in the year they were offered group health coverage and what the premiums for family coverage would be during that period, as set forth in the instructions to the form. Form 1095-C is for the employee's records but need not be attached to the employees' individual tax return.

IRS Form 1094-C is an annual return filed with the IRS indicating the number of employees who were eligible for group health coverage during each of the 12 months, whether these employees were offered group family health coverage (with minimum essential coverage - which your insurance plans most likely are), full time employee count and all employee count and list of affiliated employers.

Often, the insurance company will provide the information for these forms.

3. Determination of Full-Time Status of Employees for Purposes for Eligibility for Health Insurance Coverage

Determination of full time status for purposes of being eligible for health insurance coverage is made depending on whether the employee has worked an average of 30 hours per week (or 130 hours per month), during a "standard measurement period" which is a 3-12 month period that the employer chooses at its discretion (but on a consistent basis). At the end of the standard measurement period the employer must during an administrative period" (not more than 90 days) determine an employee’s eligibility, discuss the employee’s status with them, explain the premiums required to be paid by the employee and enroll them in the plan if they elect to do so. During a "stability period" (6-12 months and not shorter than the Standard Measurement Period), the employees' enrollment  remains protected even if their hours drop below 30 per week until the Stability Period has ended and eligibility is determined again.

One example used by some companies is a 9 month period of the previous year (e.g., Jan. to Sept. of the previous year) for determining whether the employee average hours per month is over 130 hours. The administrative period (up to 90 days) could be Oct. to Dec. to determine an employee’s eligibility and offer to enroll them in the plan. For those who have over 130 hours a month, the "stability period" could be 9 months. Another alternative used by other companies is a 3 month determination period, a one month administrative period and a 6 month stability period.

4. Notice of Eligibility

A notice of eligibility should explain that the employees are eligible for group health insurance for their family with the cost (or where to obtain the cost) of the premiums.

A similar notice could be sent to the group offered the individual coverage HRA.

5. Nondiscrimination Testing for Insured Health Insurance Coverage Currently Only Affects the Ability of Highly Compensated Employees to Make Employee Contributions for Premiums on a Pre-tax Basis

In terms of nondiscrimination rules for health insurance coverage, unless the group health plan is self-insured, there are currently no nondiscrimination restrictions even if the higher paid employees receive a larger share of subsidized premiums. (This should be monitored from year to year, because there may be new regulations under the ACA that could apply § 105(h) to insured plans.)   If a health plan If it is self-insured, there are two nondiscrimination tests in Code § 105(h). The eligibility test of § 105(h) is based on whether enough non-highly compensation individuals are benefiting from the plan using the 70% test, the ratio percentage test and the nondiscrimination test based on facts and circumstances test of Code § 410(b). The benefits test determines if all participants are eligible for the same benefits, and requires that the plan’s terms as written do not discriminate and plan operation comply on a facts and circumstances basis. A Highly Compensated Individual is (i) one of the five highest-paid officers; (ii) a shareholder who owns more than 10% of the value of the employer’s stock; or (iii) among the highest-paid 25% of all employees.

6. Reimbursing Individual Coverage Premiums through an HRA and Restriction on Offering the Same Group the Individual Premiums HRA and Group Health Coverage

Historically, reimbursing employees for their individual health insurance premiums was problematic for various reasons, including (i) taxability to the employee for such reimbursement, and (ii) inadvertently creating a group health plan which would be subject to ACA requirements such as yearly dollar limits.

However, on June 20, 2019, the Trump administration finalized rules for "individual coverage Health Reimbursement Arrangements" or "ICHRAs" that could be used to allow employers to reimburse employees for individual health insurance premiums through an individual coverage HRA instead of offering a group health plan.

An employee reimbursed through the ICHRA should also be able to enroll in individual health insurance coverage through the Marketplace Exchange or through a private plan. However, if you opt to take the ICHRA coverage you would probably lose your ability to qualify for a premium tax credit to help pay for Marketplace coverage.

2019 rules in Treas. Reg. § 54.9802-4(c)(2), DOL Reg. § 2590.702-2 & HHS Reg. § 146.123(c)(2), 84 Fed. Reg. 28888, 28895 (June 20, 2019), provide that "To the extent a plan sponsor offers any class of employees ... an individual coverage HRA, the plan sponsor may not also offer a traditional group health plan to the same class of employees." The reason for this rule as explained in the Preamble 84 Fed. Reg. at  28895 is in order to prevent a plan sponsor from intentionally or unintentionally steering any participants or dependents with adverse health factors away from the plan sponsor’s traditional group health plan and into the individual market.

"Group of employees" is described in paragraph (d) of the above regulations as including, e.g., employees working in different locations, employees in or not in a unit covered by a specific union contract, employees who have or have not satisfied a waiting period, nonresident aliens and U.S. citizen employees, salaried and hourly employees, etc. Of course, the same person could not be offered group health coverage and decline and be offered reimbursement of individual premiums or vice versa, as one person could certainly not be two plans.

Thus, a separate identifiable group could be offered group coverage and another identifiable group could be offered the individual coverage HRA. Both satisfy the 95% substantially all requirement for 30+ hour employees who must be offered coverage under the firm's group health plan or an individual coverage HRA in order to avoid the large penalty of Code § 4980H(a). For the group that is offered group health coverage, if individuals in that group decline coverage, they cannot then be offered reimbursement of individual premiums under an individual coverage HRA.

Additional issues arise in connection with these matters, and I would be happy to discuss them with you. If you have any questions, please contact me at number or email listed above.