1. January 3, 2013
News Flash January 3, 2013 – President Signs Bill Extending Tax Policies of Client Interest
On January 2, 2013, the President signed the legislation passed and approved by both the Senate and the
House of Representatives to avert the tax side of the so-called fiscal cliff. The American Taxpayer Relief Act
of 2012 (ATRA) will shield many middle-class taxpayers from tax increases set to take effect this month,
while at the same time, let tax rates rise for others. As has been widely reported, the measure
permanently extends ordinary income tax rates for individuals earning less than $400,000 per year (and
joint filers earning less than $450,000 per year) and alters capital gains and dividend rates, the estate tax
and the Alternative Minimum Tax, while delaying for an additional two months the effective date for
automatic “sequestration” spending cuts. As the Act is extensive this News Flash only addresses certain
provisions which are believed to be applicable to Willis clients and their employees as it relates to
employee benefits. For additional guidance on how this Act personally affects client employees, those
individuals should speak with a tax adviser. The legislative language can be found at
http://www.gpo.gov/fdsys/pkg/BILLS-112hr8enr/pdf/BILLS-112hr8enr.pdf
What Was Not Included
For the years 2011 and 2012, Congress had legislated a temporary payroll tax holiday designed to put
more money into the hands of American workers. During those two years, employees paid 4.2% of their
wage earnings for the Social Security tax, instead of the normal 6.2% rate. However, ATRA did not include
an extension of the payroll tax holiday. Therefore, as of January 1, 2013 the Social Security taxes will
revert back to the 6.2% rate on earned income up to the Social Security 2013 wage base of $113,700. As
the payroll tax holiday only saw a reduction for employee contributions and not employer matching
contributions, the failure to extend this tax holiday will not affect employers.
Benefit Related Provisions
Employer Provided Education Assistance
ATRA permanently extends the expanded exclusion from income and employment taxes employer
provided education assistance up to $5,250. Prior to 2001, the Economic Growth and Tax Relief
Reconciliation Act of 2001 (EGTRRA) temporarily extended the income exclusion and expanded the
provision to include undergraduate and graduate education. The Act extended these provisions for taxable
years beginning after December 31, 2012.
Adoption Credit/Assistance
Taxpayers adopting children can receive enhanced adoption credit and the income exclusion for
employer-paid or reimbursed adoption expenses. EGTRRA increased the credit and income exclusion from
$5,000 previously ($6,000 for a special needs child) to $10,000. ATRA extends for taxable years beginning
after December 31, 2012 the increased adoption credit amount and the exclusion for employer-assistance
programs as enacted in EGTRRA. The limit is applicable both for non-special needs and special needs
adoptions. There is a phase-out of the adoption credit for taxpayers above a specified inflation-adjusted
level of modified adjusted gross income. For 2013, the adoption credit phase out beginning point is
projected to be $191,530.

2. January 3, 2013
Parity for Exclusion from Income for Employer-Provided Mass Transit and Parking Benefits
This provision would extend through 2013 the increase in the monthly exclusion for employer-provided
transit and vanpool benefits from $125 to $240, so that it would be the same as the exclusion for
employer-provided parking benefits.
CLASS Program under PPACA Repealed
The bill formally repeals the Community Living Assistance Services and Supports (CLASS) program, the
voluntary, federally administered long-term care insurance program established under the Patient
Protection and Affordable Care Act (PPACA), and institutes a “Commission on Long-Term Care” that would
develop a new comprehensive long-term care plan and possibly make formal recommendations to
Congress. The Obama Administration had already suspended implementation of the CLASS program, citing
concerns about fiscal sustainability.
As previously noted, the Act contains many provisions that may personally affect the employees of clients,
so additional guidance of a tax adviser should be sought.
This information is not intended to represent legal or tax advice and has been prepared solely for informational
purposes. You may wish to consult your attorney or tax adviser regarding issues raised in this publication.

3. January 3, 2013