The American Taxpayer Relief Act of 2012, also known as the legislation passed to avert the "fiscal cliff," included several changes impacting employer-provided benefits.
- Qualified Educational Assistance Programs. Employers providing educational assistance to employees through a qualified educational assistance plan may continue to provide the benefits on a pre-tax basis. The exclusion from income for employer-provided educational assistance programs up to $5,250 per year is now permanent. It was sent to expire at the end of 2013.
- Qualified Transportation Plans. The limit for transit pass benefits and van-pooling benefits is increased to $240 per month retroactive to January 1, 2012. Subsequent IRS guidance increased the limit to $245 beginning January 1, 2013.
- Adoption Assistance Benefits. The exclusion from income for employer-provided adoption assistance benefits is now permanent. It was set to expire at the end of 2012. The exclusion was $12,650 in 2012 and is indexed for inflation.
- Employer-Provided Child Care. The exclusion from income for employer-provided child care benefits is now permanent. It was set to expire at the end of 2012.
- Dependent Care Assistance Plan. The deemed earned income of a spouse of a dependent care flexible spending account plan participant who is a full-time student or incapable of self- care remains at $250 per month for one qualifying individual and $500 per month for more than one qualifying individual. These numbers were set to decrease in 2013. Changes to the earned income credit and child tax credit were also expanded which may impact the desirability of DCAP participation.
The fiscal cliff legislation will soon take center stage again as Congress works through the debt limit in the next few months. For now, employees and employers see positive changes with the extension of higher limitations for some popular employer-provided benefits.
