Although the recent Tax Cuts and Jobs Act largely retains the favorable tax treatment afforded employees who receive employer-provided transportation assistance, it denies employers any tax deduction for providing these tax-favored benefits. Moreover, tax-exempt employers will now be subject to unrelated business income tax on such benefits. Because the new rules took effect as of January 1, 2018, employers currently sponsoring such programs should promptly evaluate their options.
Despite rumors to the contrary, the tax bill introduced into the House of Representatives by the Republican Party leadership would do nothing to restrict employees’ ability to make pre-tax deferrals to 401(k), 403(b), or 457(b) plans. Trial balloons had suggested that pre-tax deferrals might be limited to only half of the overall annual deferral limit (or even less), with any remaining deferrals made only on a “Roth” (after-tax) basis. But at least for now, “Rothification” appears to be dead.
What the House bill would do, however, is perhaps even more surprising. A slew of tax-favored fringe benefits would be eliminated. And nonqualified deferred compensation as we now know it would be entirely transformed. Incredibly enough, most of these changes would take effect as of January 1, 2018 – less than two months after the bill’s introduction.
The Department of Labor has issued final regulations under Section 503 of ERISA that purport to enhance the disability benefit claims and appeals process for plan participants. These regulations amend the DOL’s disability claims procedure regulations issued in 2002. The new regulations generally affect the procedures for filing disability benefit claims, providing notice of adverse benefit determinations, and appealing adverse benefit determinations.
Before leaving DC for the winter holidays, Congress and President Obama agreed on a provision granting small employers a bit of relief from the Affordable Care Act. Tucked at the very end of the 21st Century Cures Act is a provision allowing certain small employers to offer their employees a health reimbursement arrangement (“HRA”) that need not be “integrated” with a group health plan. Employees may then use their employer’s pre-tax contributions to such an HRA to pay premiums under individual health insurance policies.
Thanks to recent IRS guidance, sponsors of health FSAs may now allow employees to carry over up to $500 of their account balance from one plan year to the next. Notice 2013-71 creates a new exception to the “use-it-or-lose-it rule” that has long discouraged employees from contributing to a health flexible spending account (“health FSA”). This new carryover option is immediately available, but FSA sponsors who wish to implement this option in either 2013 or 2014 will need to act quickly.
Employers offering employee assistance programs (“EAPs”) will want to take note of recent agency guidance concerning the impact of the Affordable Care Act (“ACA”) on those EAPs. This impact could be felt by their employees, as well. An employer’s immediate task will be to determine whether its EAP constitutes an “excepted benefit” under the ACA rules. If it does not, the EAP should be revised or terminated before January 1, 2014.
In an apparent change of position, the IRS has now indicated (in Announcement 2011-14) that breast pumps and supplies that assist lactation qualify as medical care expenses under Code Section 213(d) because they are for the purpose of affecting a structure or function of the lactating woman’s body.
Amid the year-end rush to comply with the reform provisions of the Affordable Care Act (“ACA”) for group health plans, it is easy to overlook the ACA’s effects on other health plan arrangements. As discussed in our May 2010 article, cafeteria plans, health flexible spending accounts (“FSAs”), health savings accounts (“HSAs”), and health care reimbursement arrangements (“HRAs”) are subject to several of the same requirements that apply to group health plans.
In September of this year, the IRS issued official guidance on how employers may convert unused leave under a bona fide sick leave, vacation leave, or paid-time-off (“PTO”) program into contributions to a qualified, defined contribution plan (such as a profit sharing or 401(k) plan). Revenue Rulings 2009-31 and 2009-32 provide a virtual “roadmap” for how the value of unused leave (that might otherwise be forfeited each year or paid out in cash on termination of employment) may be used as a basis for making additional employer contributions, or in some cases, employee elective deferrals, to such a plan.
In a closely watched case pending in a Massachusetts federal court, Scotts LawnService has successfully defended its policy of refusing to hire anyone who smokes, even if they do so on their own time. The employer’s anti-smoking policy was just one component of a comprehensive wellness initiative. Employers across the country who are seeking judicial guidelines on the extent to which they can stretch wellness programs may find some comfort in this ruling, but they would be well advised not to place too much emphasis on it.