The Internal Revenue Service (IRS) recently released five new Section 125 proposed regulations. If adopted, these will replace six temporary regulations previously proposed but withdrawn by the IRS. Some of the more interesting details of the proposed regulations state:
• Complete rules for Health Savings Accounts (HSAs), including offering HSAs as a benefit under the Plan, how it works with the grace period, and how to handle HSA/FSA transfers.
• That under these proposed regulations; S-Corporation shareholders are not eligible to participate in a Cafeteria Plan.
• That the latest rules issued on debit card substantiation are still applicable. The due date of those regulations has not changed.
• That all non-debit card charges must be substantiated by a third party before payment can be made.
• That dependent care expenses must have incurred and be substantiated prior to reimbursement.
• That under these proposed regulations; S-Corporation shareholders are not eligible to participate in a Cafeteria Plan.
• That the latest rules issued on debit card substantiation are still applicable. The due date of those regulations has not changed.
• That all non-debit card charges must be substantiated by a third party before payment can be made.
• That dependent care expenses must have incurred and be substantiated prior to reimbursement.
The proposed regulations also deal with numerous additional topics, including non-discrimination testing, individually purchased insurance premiums, the written Plan Document, vacation days as an eligible expense, qualified benefits, term life insurance premiums, fund balances at year-end, and orthodontia expenses.
While these regulations will not take effect until January 1, 2009, the particulars could easily change between now and then. Your TASC team is staying on top of these issues…we are a progressive organization and advocate tirelessly for our Clients. That being said, these changes are seen as progress to TASC. They reinforce the value of these Plans and are another indicator that TASC and the services we provide will be around for a long time to come.
We saw these changes coming. After all, some of the current regulations have had major issues since their inception in the mid-eighties and the industry has clearly needed more guidance. We are establishing teams to implement any necessary changes when the time is right. Meanwhile, TASC’s Plans are in compliance now and will remain so into the future. You can count on it.
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