- Adoption assistance programs. The maximum employer-provided adoption assistance benefit that an employee can exclude from gross income is now $13,810, a slight reduction from the originally reported $13,840. The exclusion begins to phase out once a taxpayer’s modified adjusted gross income exceeds $207,140 (reduced from $207,580) and is completely phased out once modified AGI reaches $247,140 (reduced from $247,580).
These revised limits are due to a change in how the cost-of-living adjustments are calculated. The new chained-CPI methodology will cause affected IRS limits to rise more slowly over time.
Affected employers should notify employees of the reduced limits and make any necessary adjustments to benefit programs and systems. Some suggestions include:
- Adjust payroll systems to cap employee contributions to family HSA at $6,850 and excludable adoption assistance program benefits at $13,810
- Describe the HSA withdrawal procedure to employees that have already contirbuted the previously announced 2018 family maximum of $6,900
- Consider amending the adoption assistance program to reduce the maximum benefit to $13,810 since any benefit paid over this amount will need to be reported as taxable income to employees
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