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Employee Benefits Bulletin, January/February 2002NEW GUIDANCEIRS releases guidance on the changes made to §404(k) by EGTRRA. Notice 2002-2 is a question and answer guide to the requirements of the 404(k) deduction for dividends paid on employer stock in an ESOP. Look for the detailed story in next month's newsletter! IRS releases Revenue Ruling 2002-3 which includes in gross income reimbursements made by an employer to an employee for salary reduction amounts used to pay for health insurance premiums (a widely-marketed tax avoidance program). President Bush signs into law the Administrative Simplification Compliance Act. The Act provides an extended deadline for compliance with the electronic data interchange (EDI) and medical data code set standards of HIPAA. Only covered entities that file a detailed compliance plan with the Department of Health and Human Services by the original compliance date (October 16, 2002) will qualify for the one year extension to October 16, 2003. President Bush signs H.R. 3061, extending the "sunset date" of the Mental Health Parity Act to December 31, 2002. IRS releases final regulations on furnishing documents to the Secretary of Labor on request. The new regulations, effective March 8, 2002, require that a plan administrator furnish documents requested by the Department of Labor within 30 days. Documents requested may include the SPD, any SMMs not yet incorporated, the plan document, the latest annual report, the bargaining agreement, trust agreement, contract, or other governing plan document described in ERISA § 104(b)(4) which the plan administrator has failed to produce upon prior written request by a participant or beneficiary. The Department is entitled to make a request on behalf of a participant, a beneficiary, an alternate payee of a QDRO, a qualified beneficiary under COBRA or an alternate recipient under a qualified medical child support order. The potential penalty for each failure to produce is $100 per day up to $1000. IRS requires match-based safe harbor 401(k) plans to reduce the suspension period for employee deferrals after a hardship distribution from 12 to 6 months for distributions after December 31, 2001. (See Notice 2001-56).
IRS releases an updated Publication 502 describing medical and dental expenses available for the Internal Revenue Code § 213 deduction (expenses in excess of 7.5% of taxpayer's adjusted gross income).
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