October 2017 HR Alert

October 2017

In order to avoid costly penalties and administratively burdensome correction procedures, plan sponsors must remain up-to-date with respect to applicable Health and Welfare plan limits. Yesterday,October 20, 2017, the IRS announced cost-of-living adjustments affecting 2018 dollar limitations for Health and Welfare plans and other related Health and Welfare Benefits items. We’ve included some of the most commonly used business benefits below. While some limits remain the same, there have been a number of adjustments.

An Employee Stock Ownership Plan (ESOP) is a type of employee benefit plan, similar to a profit sharing plan, that is designed to invest primarily in the stock of the employer.  ESOPs can be used by private or public companies in a variety of ways: as a vehicle for retirement for employees, a tax-advantaged method to raise new capital, an exit strategy to give owners an avenue to sell their shares, to create a subsidiary of the employer, or as an incentive to increase employee morale by sharing ownership of the company with its employees. ESOPs can own any percentage of the employer, including owning up to 100% of all the employer stock. Because the ESOP is often used as a financing tool for the employer, and because the qualified retirement plan is the shareholder for the employer, there are features unique to ESOPs that are not available for other qualified retirement plans.

Unlike a 401(k) plan, the ESOP typically consists solely of contributions from the employer rather than contributions from the employee, and an ESOP is specifically allowed to finance the purchase of employer stock. To contribute to the ESOP, the employer makes tax-deductible contributions in cash to repay a loan that was used to purchase shares, or the cash is used to purchase shares directly from the employer or owners without the use of a loan. The employer may also make tax-deductible contributions to the ESOP in the form of employer shares rather than cash, but this likely dilutes the value of the existing shares and is not the preferred method of contribution to an ESOP. Once the ESOP obtains additional shares of the employer, the employees then receive the employer shares in their ESOP account based on a formula that takes into consideration the employee’s compensation and years of service with the employer. All employees are eligible to participate in the ESOP after a certain period.


Health and Welfare Plan Inflation-Adjusted Limits for 2018
Item IRS Code Section 2018 Limit 2017 Limit Note
Unearned Income of Minor Children Taxed as if Parent’s Income 1(g) $1,050 $1,050 The child’s gross income must be greater than $1,050 but less than $10,500.
Adoption Credit 23 $13,840 $13,750 The credit begins to phase out for taxpayers with modified adjusted gross income more than $207,580.
Employee Health Insurance Expense of Small Employers 45R $26,700 $26,200 The limit of $26,700 is used in calculations to determine the actual credit for an employer.
Cafeteria Plans 125 $2,650 $2,500 Limit on voluntary employee salary reductions for contributions to health FSA.
Qualified Transportation Fringe Benefit 132(f) $260 limit on commuter highway vehicle

$260 limit on qualified parking

$255 limit on commuter highway vehicle

$255 limit on qualified parking

Monthly limit on the amount that may be excluded from an employee’s income for qualified transportation benefits.
Adoption Assistance Programs  137 $13,840 $13,570 The credit begins to phase out for taxpayers with modified adjusted gross income more than $207,580.



One of the most common compliance issues for employers and plan sponsors is failure to adhere to annual retirement plan limits. In order to avoid costly penalties and administratively burdensome correction procedures, plan sponsors must remain up-to-date with respect to applicable retirement plan limits. Today, October 19, 2017, the IRS announced cost-of-living adjustments affecting 2018 dollar limitations for retirement plans and other retirement-related items.  Please note that the chart below does not include all applicable retirement plan limits, just some of the common ones.


401k Plan Limits
2018 2017 2016 2015
Elective Deferrals $18,500 $18,000 $18,000 $18,000
Catch-Up Contributions $6,000 $6,000 $6,000 $6,000
Annual Defined Contribution Limit $55,000 $54,000 $53,000 $53,000
Annual Compensation Limit $275,000 $270,000 $265,000 $265,000
Highly Compensated Employee $120,000 $120,000 $120,000 $120,000
Non-401k Related Limits
Defined Benefit Plans $220,000 $215,000 $210,000 $210,000
403(b)/457 Elective Deferrals $18,500 $18,000 $18,000 $18,000
SIMPLE Employee Deferrals $12,500 $12,500 $12,500 $12,500
SIMPLE Catch-Up Contribution $3,000 $3,000 $3,000 $3,000
SEP Annual Compensation Limit $275,000 $270,000 $265,000 $265,000
Social Security Wage Base $128,700 $127,200 $118,500 $118,000







Copyright © 2017 Hall Benefits Law, All rights reserved.

This newsletter is intended to provide a Firm update to clients and friends. It is intended to be informational and does not constitute legal advice regarding any specific situation. This material may also be considered attorney advertising under rules of certain jurisdictions.

Tags: , , , , , , , ,

Anne Tyler is an energetic and conscientious attorney with experience in compliance issues for ERISA and Benefits matters, having worked at some of the most prestigious law firms in the Southeast. She is also very personable, which is a great combination.
Nancy PridgenAttorney |Patel Burkhalter Law Group
My overall experience with Hall Benefits Law, LLC was very pleasing and the service received from Anne Tyler was exemplary in every way. I required technical research in a number of different areas and Anne Tyler performed them above expectation. She was knowledgeable, responsive, cogent, and accessible. I will be happy to recommend her for similar issues.
Samuel R. ChandOwner |Samuel R. Chand Consulting
Anne Tyler is an excellent advisor with a true command of ERISA and Benefits law.  She is an effective communicator and a favorite of clients and colleagues.
Anson AsburyPrincipal |Asbury Law Firm
Hall Benefits Law, LLC brings the unique qualities of availability and approachability, as well as thought provoking discussion that greatly assists us with our clients. Anne Tyler is always willing and available to bring her knowledge and expertise about health care law which eases any concerns about compliance. In a client meeting to discuss the Affordable Care Act, Anne Tyler’s unique way of presenting complex information in an easy to understand manner enabled the client to formulate an action plan. She is an absolute pleasure to work with.
Jeff KochDirector of Benefits & Marketing Communications |Resource Alliance
Anne Tyler is a true expert in her field, and I am honored to refer my clients to her. All that I have referred to her are always impressed with her knowledge, compassion, and ability to give her clients clarity and creative solutions. I highly recommend Anne Tyler to anyone who is looking for an employee benefits attorney; she knows how to get results.
Sara KhakiAttorney/Owner |The Khaki Law Firm LLC
Anne Tyler is great at interpreting the law. Her research and easy to understand documents are professional, organized, thorough and delivered in a timely manner. We appreciate her accessibility and willingness to offer suggestions and meet with our clients in person or via phone for meaningful discussions and getting answers quickly.
Andy WeyenbergVP of Operations |Resource Alliance
Hall Benefits Law, LLC assisted me with review, documentation, and a written opinion for a specific DOL situation. Anne Tyler is professional as well as personable, articulate, and knowledgeable on the subject for which I hired her. Working with someone who has personality and good communication skills is not necessarily a common attribute. Anne Tyler brings these attributes. The price for the work done, independent research as well as client presentation, was very fair and I would be happy to recommend Anne Tyler to any associate or colleague in need of her legal expertise.
H.W. YoungbloodPresident |Financial Network Associates, Inc.