On October 31st, the IRS released the 2014 cost-of-living adjustments (COLAs) for a wide variety of tax-related limits, including limits relating to salary reductions under Health Care FSAs, Qualified Transportation Benefits and Dependent Care FSAs. The most notable changes impact transportation benefits and therefore represent the primary focus of this BeneTIPS Update.

For 2014, the monthly limit on the amount that may be excluded from an employee’s income for qualified parking benefits is $250 (a $5 increase from the 2013 limit of $245). The combined monthly limit for transit passes and vanpooling expenses for 2014 is $130 (a $115 decrease from the 2013 limit).

The substantial decrease to the mass transit limit is attributed to the expiration of the temporary “rule of parity” that made the combined limit for transit and vanpooling the same as the parking limit for 2012 and 2013. Whether Congress will eventually extend the rule of parity to 2014 is uncertain. Earlier this year, Congress belatedly extended this rule for 2013 (see our January 3, 2013 BeneTIPS Update).

Next Steps:
The adjusted transit limit introduces a set of new communications, enrollment, administrative and payroll considerations that employers who offer these benefits will want to consider in partnership with the Vantagen team:

• We recommend that employers communicate these adjusted limits and allow employees time beginning in December 2013 to make election changes. The timing of this announcement allowed most employers operating calendar year plans to integrate it within the annual enrollment process.
• For the mass transit change, those currently enrolled beyond the $130 limit will be allowed to continue to make post-tax contributions when expenses exceed the new maximum pre-tax allowable election.  Payroll records will need to be adjusted accordingly to accommodate this change and any other election changes that a participant might request.
• We will be releasing a simple employee-level communication announcing the change and enrollment opportunity. Our clients will be able to choose the preferred delivery method (email, traditional mail). A sample participant communication and change form are included with this Update.
• We will supply the enrollment mechanism, process the benefit changes and transmit the corresponding payroll deduction changes. Some exceptions may apply in situations where enrollment is not coordinated by Vantagen as standard.