A Soft Landing from the Fiscal Cliff for Employee Benefits

Well, Congress in the season of giving has provided plan sponsors and participants with multiple beneficial opportunities to start 2013. Congress passed the American Taxpayer Relief Act of 2012 (H.R. 8), also known as the “Fiscal Cliff” legislation, on January 1, 2013, and President Obama signed the legislation on January 2, 2013. The Fiscal Cliff legislation includes various employee benefit provisions that are beneficial for employers and employees. This legislation:

• Significantly expands the ability for participants to convert non-Roth accounts within 401(k), 403(b), and 457(b) governmental plans to Roth accounts without withdrawing amounts from the plan;
• Extends indefinitely the tax exclusions for employer-provided educational and adoption assistance, which were both scheduled to expire at the end of 2012;
• Re-established parity between mass transit and parking fringe benefits for 2012 and 2013; and
• Indefinitely extended prior legislation that impacted the amount of the tax exclusion for dependent care assistance benefits.

As widely reported, the Fiscal Cliff legislation permanently extends the Bush era tax cuts for many taxpayers while increasing tax rates for individuals with taxable income above statutory thresholds.

The Fiscal Cliff legislation does not, however, avoid the expiration of the payroll tax cuts that were in effect for 2011 and 2012, or the January 1, 2013 effective date for the new Medicare taxes.

For more details on these significant provisions, read the full article here.