Pension & Benefits News IRS issues 2021 adjusted limits for various benefits
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Monday, November 2, 2020

IRS issues 2021 adjusted limits for various benefits

By Pension and Benefits Editorial Staff

In Rev. Proc. 2020-45, the IRS provides a variety of inflation-adjusted figures for 2021, including figures for cafeteria plans, long-term care, medical savings accounts (MSAs) and transportation fringe benefits.

Cafeteria plans. For the taxable year beginning in 2021, the dollar limitation under Code Sec. 125(i) on voluntary employee salary reductions for contributions to health flexible spending arrangements remains $2,750.

Long-term care. For taxable years beginning in 2021, the limits under Code Sec. 213(d)(10) for eligible long-term care premiums deductible as “medical care,” based on the insured’s age before the close of the taxable year, are as follows:

  • for those age 40 or younger, the limit is $450 (up from $430 in 2020);
  • for those older than age 40 but not older than age 50, the limit is $850 ($810);
  • for those older than age 50 but not older than age 60, the limit is $1,690 ($1,630);
  • for those older than age 60 but not older than age 70, the limit is $4,520 ($4,350); and
  • for those older than age 70, the limit is $5,640 ($5,430).

In addition, for calendar year 2021, the per-day limit applicable to aggregate payments for per diem-type long-term care insurance contracts and amounts received by a chronically ill individual under a life insurance contract under Code Sec. 7702B(d)(4) is $400 ($380 in 2020).

MSAs. For self-only coverage in 2021, a high-deductible health plan (HDHP) is defined in Code Sec. 220(c)(2)(A) as a plan that has an annual deductible that is not less than $2,400 and not more than $3,600 ($2,350 and $3,550 in 2020) and annual out-of-pocket expenses that do not exceed $4,800 (up from $4,750 in 2020). For family coverage in 2021, an HDHP has an annual deductible that is not less than $4,800 and not more than $7,150 (up from $4,750 and $7,100 in 2020) and annual out-of-pocket expenses that do not exceed $8,750 (up from $8,650 in 2020).

Transportation. For the taxable year beginning in 2021, the monthly limitation under Code Sec. 132(f)(2)(A), regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass, remains $270. The monthly limitation under Code Sec. 132(f)(2)(B), regarding the fringe benefit exclusion amount for qualified parking, also remains $270.

QSEHRA. For tax years beginning in 2021, in order to qualify as a small employer health reimbursement arrangement (QSEHRA) under Code Sec. 9831(d), the total amount of payments and reimbursements for any year cannot exceed $5,300 (up from $5,250 in 2020) ($10,700 for family coverage, up from $10,600 in 2020).

SOURCE: Rev. Proc. 2020-45, I.R.B. 2020-46, dated November 9, 2020.

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