Recent­ly, the Inter­nal Rev­enue Ser­vice (IRS) issued the instruc­tions for Forms 1094/1095 for the 2017 tax year, announced PCORI fees for 2017–18, and announced cost-of-liv­ing adjust­ments for 2018. The IRS pro­vid­ed addi­tion­al guid­ance on leave-based dona­tion pro­grams’ tax treat­ment and released an infor­ma­tion let­ter on COBRA and Medicare. Here’s a recap of these actions for your reference.

IRS Announces Cost-of-Liv­ing Adjust­ments for 2018

The IRS released Rev­enue Pro­ce­dures 2017–58 and Notice 2017–64 to announce cost-of-liv­ing adjust­ments for 2018. For exam­ple, the dol­lar lim­it on vol­un­tary employ­ee salary reduc­tions for con­tri­bu­tions to health flex­i­ble spend­ing accounts (FSAs) is $2,650, for tax­able years begin­ning with 2018.

Request UBA’s 2018 desk ref­er­ence card with an at‑a glance sum­ma­ry of the var­i­ous limits.

IRS Announces PCORI Fee for 2017–18

The IRS announced the Patient-Cen­tered Out­comes Research Insti­tute (PCORI) fee for 2017–18. The fee is $1.00 per cov­ered life in the first year the fee is in effect. The fee is $2.00 per cov­ered life in the sec­ond year. In the third through sev­enth years, the fee is $2.00, adjust­ed for med­ical infla­tion, per cov­ered life.

For plan years that end on or after Octo­ber 1, 2016, and before Octo­ber 1, 2017, the indexed fee is $2.26. For plan years that end on or after Octo­ber 1, 2017, and before Octo­ber 1, 2018, the indexed fee is $2.39.

For more infor­ma­tion, view UBA’s FAQ on the PCORI Fee.

IRS Pro­vides Addi­tion­al Guid­ance on Leave-Based Dona­tion Pro­grams’ Tax Treatment

Last month, the IRS pro­vid­ed guid­ance for employ­ers who adopt leave-based dona­tion pro­grams to pro­vide char­i­ta­ble relief for vic­tims of Hur­ri­cane and Trop­i­cal Storm Irma. This month, the IRS issued Notice 2017–62 which extends the guid­ance to employ­ers’ pro­grams adopt­ed for the relief of vic­tims of Hur­ri­cane and Trop­i­cal Storm Maria.

These leave-based dona­tion pro­grams allow employ­ees to for­go vaca­tion, sick, or per­son­al leave in exchange for cash pay­ments that the employ­er will make to char­i­ta­ble orga­ni­za­tions described under Inter­nal Rev­enue Code Sec­tion 170©.

The employ­er’s cash pay­ments will not con­sti­tute gross income or wages of the employ­ees if paid before Jan­u­ary 1, 2019, to the Sec­tion 170© char­i­ta­ble orga­ni­za­tions for the relief of vic­tims of Hur­ri­cane or Trop­i­cal Storm Maria. Employ­ers do not need to include these pay­ments in Box 1, 3, or 5 of an employ­ee’s Form W‑2.

IRS Releas­es Infor­ma­tion Let­ter on COBRA and Medicare

The IRS released Infor­ma­tion Let­ter 2017–0022 that explains that a cov­ered employ­ee’s spouse can receive COBRA con­tin­u­a­tion cov­er­age for up to 36 months if the employ­ee became enti­tled to Medicare ben­e­fits before employ­ment ter­mi­na­tion. In this case, the spouse’s max­i­mum COBRA con­tin­u­a­tion peri­od ends the lat­er of: 36 months after the employ­ee’s Medicare enti­tle­ment, or 18 months (or 29 months if there is a dis­abil­i­ty exten­sion) after the employ­ment termination.

By Danielle Capilla

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