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IRS Announces Impending Tighter Enforcement of Employer-Provided Meals, Fringe Benefits

Internal Revenue Code § 119 allows employers to deduct 100% of the value of meals provided to employees when they are for the convenience of the employer, and they are furnished on the business premises of the employer. Meals provided for “the convenience of the employer” are also excludable from the employee’s taxable income. However, last month, the IRS announced that it plans to change that interpretation, which will have significant implications for both tax and wage and hour liability. The IRS announced as part of its Priorities Guidance Plan that it plans to issue new guidance regarding employer-provided meals, which we can assume is not a positive development for employers. The Wall Street Journal reported that IRS auditors have already started “flagging the issue and demanding back taxes from companies amounting to 30% of the meals’ fair market value.”

IRS Issues Final and Proposed Regulations on Hybrid Pension Plans

The IRS recently issued long-awaited final regulations on hybrid pension plans, along with proposed transitional relief for hybrid pension plans that are not in compliance with the final rules. The newly issued final rules provide guidance on issues not covered in the final hybrid plan regulations that were issued in 2010, and clarify certain issues in the 2010 final regulations. The final rules are generally effective for plan years beginning on or after January 1, 2016, except that provisions in the final rules clarifying provisions in the 2010 final rules are effective for plan years beginning on or after January 1, 2011.

Ninth Circuit Joins First Circuit in Finding that the Elimination of a Pension Transfer Option does not Violate ERISA's Anti-Cutback Rule

In Anderson v. DHL Retirement Pension Plan,1 the Ninth Circuit followed the First Circuit in finding that the elimination of the right to transfer an account balance from a defined contribution plan to a defined benefit plan does not violate the Employee Retirement Income Security Act of 1974's (ERISA) "anti-cutback" rule. However, the Ninth Circuit reached its conclusion on a different basis than did the First Circuit.

Monthly Benefits Update - September 2014

The Internal Revenue Service (IRS) issued Notice 2014-49, which proposes an approach for dealing with changes to an employee’s look-back measurement method in determining the employee’s full-time status under the Affordable Care Act’s (ACA) “employer mandate.” The new guidance would apply to situations where an employee’s measurement period changes due to the employee’s transfer to a different position or due to the employer’s decision to modify the measurement period for that employee’s classification.

IRS Reminds Employers Value of Free Parking May Be Taxable Fringe Benefit

A recent Information Letter issued by the Internal Revenue Service (IRS) on the taxation of employer-provided parking, although noncontroversial, serves as a useful reminder that free parking for employees may result in taxes for both the employee and the employer. IRS Information Letter 2014-0017 (June 27, 2014) explains that if an employer provides a free benefit to employees for qualified parking the value of which exceeds the maximum amount that may be excluded from an employee's income per month, the value of the benefit exceeding the exclusion limit is included in the employee's wages for income and employment tax purposes.

Federal District Court Holds That Plan's One-Year Limitations Period Is Unenforceable Under State Law

On the heels of the Supreme Court’s decision in Heimeshoff v. Hartford Life & Acc. Ins. Co, a federal district court in New York has held in Halpern v. Blue Cross/Blue Shield of Western New York, 12-CV-407S (W.D.N.Y., Sept. 4, 2014) that a group health benefit plan’s shorter one-year limitations period is unenforceable because section 3221(a) of New York Insurance Law allowed for a two-year limitations period. Despite the fact that the New York’s Superintendent of Insurance approved the plan and had discretion to approve policies with provisions deviating from section 3221’s requirements, the court determined that a policy provision approved by the Superintendent could not run counter to the existing law.

HATFA Extends MAP-21 Pension Funding Stabilization

President Obama recently signed into law the Highway and Transportation Funding Act of 2014 (“HATFA”), which extends the pension smoothing provisions included in the 2012 Moving Ahead for Progress Act for the 21st Century (“MAP-21”). MAP-21 amended Section 430 of the Internal Revenue Code (the “Code”) to set interest rates for pension plan funding valuations at a range around the 25-year average of historical interest rates. Under MAP-21, the range was between 90% and 110% of the 25-year average for 2012, and would gradually expand to be between 70% and 130% in 2016. Under HATFA, the 90% and 110% range is extended for five years through 2017, after which the range expands to be between 70% and 130% in 2021.

HATFA Extends MAP-21 Pension Funding Stabilization

President Obama recently signed into law the Highway and Transportation Funding Act of 2014 (“HATFA”), which extends the pension smoothing provisions included in the 2012 Moving Ahead for Progress Act for the 21st Century (“MAP-21”). MAP-21 amended Section 430 of the Internal Revenue Code (the “Code”) to set interest rates for pension plan funding valuations at a range around the 25-year average of historical interest rates. Under MAP-21, the range was between 90% and 110% of the 25-year average for 2012, and would gradually expand to be between 70% and 130% in 2016. Under HATFA, the 90% and 110% range is extended for five years through 2017, after which the range expands to be between 70% and 130% in 2021.

Identify Yourself! Deadline for Health Plan Identifiers is Fast Approaching

One of the lesser-known health plan requirements adopted by the Patient Protection and Affordable Care Act (ACA) has an initial deadline that is fast approaching, and most employers will need to take action to ensure that their group health plans remain in compliance. As discussed below, the ACA built upon an earlier directive in the Health Insurance Portability and Accountability Act (HIPAA) to require unique identifiers for health plans and health care providers, among others. The unique identifiers, along with data formatting standards previously adopted under HIPAA, are intended to facilitate transactions between participants in the health care delivery and payment system. In 2012, the U.S. Department of Health and Human Services (DHHS) finalized regulations relating to the health plan identifier (HPID) requirement, and that requirement will soon become effective.

Identify Yourself! Deadline for Health Plan Identifiers is Fast Approaching

One of the lesser-known health plan requirements adopted by the Patient Protection and Affordable Care Act (ACA) has an initial deadline that is fast approaching, and most employers will need to take action to ensure that their group health plans remain in compliance. As discussed below, the ACA built upon an earlier directive in the Health Insurance Portability and Accountability Act (HIPAA) to require unique identifiers for health plans and health care providers, among others.