Late last week, Congress passed and President Obama signed into law the Consolidated Appropriations Act of 2016 and the Protecting Americans from Tax Hikes ("PATH") Act of 2015 - a massive, $1 trillion-plus tax and spending package that will fund the federal government for another year while providing for more than $600 billion in tax breaks. The new law does contain a few items of note for our clients and participants, so please take a moment to read through the information below summarizing the relevant provisions.
Cadillac TaxTitle I of Division P of The Appropriations Act contains three provisions relating to the excise tax ("Cadillac Tax") for high cost plans. The most important of these is, of course, the postponement of the effective date of the tax by two years: instead of going into effect in 2018 as was anticipated, the Cadillac Tax will go into effect in 2020, provided it is not modified or repealed. The dollar amount of what is considered a "high cost" health plan for the purposes of calculating the tax will also be increased to reflect the delay in the tax's effective date.
Mass Transit Benefits Under current law, Qualified Transportation Fringe Benefits provided by an employer are excluded from an employee's wages (including parking, transit passes, and vanpool benefits). Before February 17, 2009, the amount excluded as Qualified Transportation Fringe Benefit was higher for parking than it was for combined vanpool and transit passes. As you may recall, legislation in 2009 eliminated this discrepancy and provided "parity" between the exclusion amount for parking and mass transit benefits. This parity, however, only extended until December 31, 2014, and in 2015, the amount of the exclusion for transit passes dropped below the exclusion for parking benefit. With the passage of the PATH Act, this parity is now permanent - meaning the exclusion amount for parking and mass transit will be equal (increasing to $255 per month for both parking and transit beginning January 1, 2016).
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