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.”
Articles Discussing General Topics In Employee Benefits.
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.
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.
The Department of Labor (DOL) recently issued a new Field Assistance Bulletin (FAB 2014-01) that provides guidance regarding the steps a plan administrator should take to fulfill his or her fiduciary duty to locate and distribute account balances to missing participants in terminated defined contribution plans. FAB 2014-01 replaces the 10-year-old Field Assistance Bulletin 2004-02 (FAB 2004-02). Since FAB 2004-02, many changes have occurred that warranted updated guidance. These changes include the discontinuance of the letter-forwarding services by the Internal Revenue Service (IRS) and the Social Security Administration, and the expansion in internet search technologies.
Executive Summary: On July 22, 2014, the U.S. Department of Labor (DOL) issued its annual memorandum announcing that, pursuant to 29 C.F.R. Section 4.52, the prevailing hourly health and welfare fringe benefit rates under the McNamara-O’Hara Service Contract Act (SCA) were increasing from $3.81 per hour to $4.02 per hour. The increase took effect immediately, and the new rate is posted on the DOL’s Wage Determinations (www.wdol.gov) and Wage and Hour Division (www.dol.gov/whd) websites. A special reduced rate of $1.66 per hour will apply to Hawaii because, under state law, most Hawaii employers are already obligated to provide their employees with health insurance. The new benefit rate was derived from the latest Bureau of Labor Statistics Employment Cost Index, summary of Employer Cost for Employee Compensation.
Various federal agencies, including the DOL’s Employee Benefits Security Administration (EBSA), have issued a proposal to amend regulations governing excepted benefits to permit health plan sponsors to provide coverage for limited scope vision, dental, wraparound, and employee assistance programs (EAPs) consistent with the qualifications for excepted benefits. Generally, HIPAA excepted benefits are exempt from certain statutory requirements, including those insurance market reforms recently enacted by the Affordable Care Act (ACA). According to the proposal, these amendments “would help employees by continuing to maintain their access to health coverage that new requirements could constrain.”
Year-End AmendmentsThe month of December is a bit different in 2013. Typically, we mark this time scrambling to amend 401(k), profit sharing, and money purchase plans in order to maintain their tax-qualified status. This year — there are no required year-end amendments for this type of plan.
The Internal Revenue Service has released a detailed list of pension plan and other retirement-related contribution limitations for Tax Year 2014 that were triggered by an increase in the cost-of-living index. As stated in the release, “[s]ome pension limitations such as those governing 401(k) plans and IRAs will remain unchanged because the increase in the Consumer Price Index did not meet the statutory thresholds for their adjustment. However, other pension plan limitations will increase for 2014.”
The Department of Labor’s Employee Benefits Security Administration (EBSA) has issued its 16th set of Frequently Asked Questions (FAQs) on the Affordable Care Act’s (ACA) implementation. The latest guidance addresses questions on the notice of coverage options available through the future health exchanges, and the limits on waiting periods for coverage.
The Kaiser Family Foundation and the Health Research & Educational Trust (Kaiser/HRET) have released their annual survey of employer-sponsored health benefits. In the survey, Kaiser/HRET analyzes the responses provided by 2,067 public and private employers with three or more employees during the first five months of 2013. According to the survey results, while health plan premiums increased in 2013 by an amount consistent with prior year increases, coverage and offer rates did not vary significantly.
Executive Summary: The Department of Labor (“DOL”) recently released a series of final rules affecting health benefits provided through multiple employer welfare arrangements (“MEWAs”). Notably, the 2012 Form M-1 filing deadline has been extended to May 1. In addition, new guidance implementing portions of the Affordable Care Act (“ACA”) applicable to MEWAs has been released.
Executive Summary: As most everyone knows by now, Congress adopted, and President Obama signed, legislation – the American Taxpayer Relief Act (the “Act”) – that resolves many elements of the so-called “fiscal cliff,” i.e., the various tax increases and expiration of tax breaks, along with spending cuts, that were to have become effective with the new year. Much has been written and reported about applying the scheduled tax rate increases only to high-income taxpayers, changing the Alternative Minimum Tax so that it would not penalize the “middle class,” increasing estate tax for certain “large” estates, allowing the 2011 payroll tax cut to expire (along with other scheduled payroll tax increases), and other “newsworthy” aspects of the Act. Little has been mentioned, however, about the Act’s provisions applicable to benefit plans and programs. So here are a few of those provisions.
Executive Summary: In Announcements 2012-45 and 2012-46, the IRS has temporarily eased the eligibility requirements for employers to participate in the employment-tax Voluntary Classification Settlement Program (“VCSP”) that was begun last year. (See our Legal Alert dated 9/27/2011.) Specifically, employers may participate in a slightly modified version of the program (the “Modified VCSP”) even if they haven’t filed all required Forms 1099, as is required for the VCSP. In addition, the prohibition against participation by taxpayers under audit and the requirement to extend the limitations period for future assessments were both changed for purposes of the Modified VCSP.
Executive Summary: In addition to the other various employee benefit plan relief provided as a result of Hurricane Sandy, on November 16 the Internal Revenue Service announced, in Announcement 2012-44, that certain individual account plans, including Section 401(k) plans, Section 403(b) tax-sheltered annuities, and governmental Section 457(b) deferred compensation plans can provide plan loans and hardship withdrawals (including “unforeseeable emergency” distributions under 457(b) plans) to those participants who were (or who have certain family members who were) adversely affected by Hurricane Sandy. In addition, IRA owners may also qualify to receive distributions with reduced administrative procedures.
On October 18, 2012, the Internal Revenue Service announced cost of living adjustments affecting various limitations applicable to pension and other retirement plans (IR 2012-77). Many of the limitations remain unchanged because they are indexed in $1000 or $5000 increments, but several will change for 2013. Some of the better-known limitations are: