Month: September 2004

The Treasury Department issued an interesting press release yesterday, trying to encourage banks and credit unions to offer health savings accounts (“HSAs”). The press release describes HSAs as a “revolutionary option” and a “great new deposit account” for banks and credit unions. Here is what Treasury had to say about why banks and credit unions should want to offer the accounts:

1. Any bank or credit union is automatically allowed to offer HSAs to their customers as either a trust or a custodial account.

2. Banks or credit unions can modify their IRA enrollment forms to reflect HSAs or use the model IRS forms. These model forms are available from the IRS or can be downloaded from the Treasury & IRS web sites. [here and here]

3. Reporting requirements are straightforward:

(a) Form 5498 is used to report total contributions made to the account during the year and the value of the account at the end of the year.

(b) Form 1099SA reports the total distributions taken from the account during the year.

4. Substantiation that distributions were used for qualified medical expenses is not required.

5. HSA funds can be invested in the same types of investments as IRAs.

6. Minimum deposit, minimum balance requirements, minimum distribution requirements, distribution timing requirements, and account fees can be set by the bank (i.e., the HSA rules do not apply any additional conditions on an HSA trustee or custodian).

By the way, the Treasury has posted all of the technical guidance pertaining to HSAs at this link. You can also access some great HSA resources at this link.

The Treasury Department issued an interesting press release yesterday, trying to encourage banks and credit unions to offer health savings accounts (“HSAs”). The press release describeds HSAs as a “revolutionary option” and a “great new deposit accounts” for banks and credit unions. Here is what Treasury had to say about why banks and credit unions should want to offer the accounts:

1. Any bank or credit union is automatically allowed to offer HSAs to their customers as either a trust or a custodial account.

2. Banks or credit unions can modify their IRA enrollment forms to reflect HSAs or use the model IRS forms. These model forms are available from the IRS or can be downloaded from the Treasury & IRS web sites. [here and here]

3. Reporting requirements are straightforward:

(a) Form 5498 is used to report total contributions made to the account during the year and the value of the account at the end of the year.

(b) Form 1099SA reports the total distributions taken from the account during the year.

4. Substantiation that distributions were used for qualified medical expenses is not required.

5. HSA funds can be invested in the same types of investments as IRAs.

6. Minimum deposit, minimum balance requirements, minimum distribution requirements, distribution timing requirements, and account fees can be set by the bank (i.e., the HSA rules do not apply any additional conditions on an HSA trustee or custodian).

By the way, the Treasury has posted all of the technical guidance pertaining to HSAs at this link. You can also access some great HSA resources at this link.

You can view the approaching hurricane Jeanne at this link.

I’m overdue in acknowledging ERISA’s 30th Anniversary. Back on Labor Day of 1974, President Ford signed into law the Employee Retirement Income Security Act. View the signing here as well as a statement from President Ford regarding the importance of the Act. It is interesting to look back on President Ford’s statement and to think about how ERISA may, or may not, have created a “brighter future” or “solid protection” for “men and women of our labor force.”

Don’t miss the Fall edition of the IRS’s Employee Plan News [pdf]. It is chock full of some very helpful information.

And for anyone who might be under the wrong impression that there is a fee for obtaining an Employer Identification Number (“EIN”), please note the IRS’s response to the confusion in the newsletter:

In our Summer 2003 Edition (page 10) [pdf], we described the new online process for getting a free EIN from the IRS. Well, recently our Customer Account Services folks have received calls from people who are certain they are in the www.irs.gov website but are being charged for an EIN. The IRS notes that keying “EIN” into some search engines will yield multiple sites that in some way relate to “EIN”. Some of the search results are for commercial sites that charge for obtaining an EIN – which is legal, but unnecessary. We advise anyone to go directly to www.irs.gov and get their EIN for free.

Here is what the IRS had to say in the Summer 2003 Edition regarding how to obtain an EIN online:

The IRS has rolled out yet another way to apply for an employer identification number (EIN). It is the new Online EIN application and features:

• 24×7 availability
• NO registration required
• NO paper sent to the IRS

Once the online form is completed, a preliminary validation is performed that lets the user know if any information the IRS needs wasn’t included. An EIN will be issued after the successful online submission of the completed Form SS-4.

Users are urged to print their SS-4 application after the EIN is assigned and keep a paper copy for their records. To do this, just click the “Print Form” button after receiving the EIN. This provisional EIN may be used immediately to file tax returns. The IRS will review the application for completeness and verify that a new EIN is needed. Users will receive a confirmation notice, CP 575, within two weeks.

Attention Third Parties: You may request EINs via the Internet on behalf of your clients. However, you must keep a copy of the Form SS-4, signed by the client, in your business files. Please note that there are a few limitations. The following request types cannot use the Internet application:

• Requests from addresses outside the continental USA, Alaska and Hawaii
• Limited Liability Company without type of entity
• Real Estate Mortgage Investment Conduits (REMIC)
• State and Local Governments
• Federal Government/Military Entities
• Indian Tribal Governments or Enterprises

To apply online go to www.irs.gov/businesses/small and click on “Online Application – Form SS-4. Note: There is no limit to the number of EIN requests that can be requested at one time.

You can access the online application here as well as information about EINs here.

By the way, did you know about this page here with links to pages for all 50 states containing information on doing business in the applicable state, taxation, links for employers, and more?

Don’t miss the Fall edition of the IRS’s Employee Plan News [pdf]. It is chock full of some very helpful information.

And for anyone who might be under the wrong impression that there is a fee for obtaining an Employer Idenficiation Number, please note the IRS’s response to the confusion in the newsletter:

In our Summer 2003 Edition (page 10) [pdf], we described the new online process for getting a free EIN from the IRS. Well, recently our Customer Account Services folks have received calls from people who are certain they are in the www.irs.gov website but are being charged for an EIN. The IRS notes that keying “EIN” into some search engines will yield multiple sites that in some way relate to “EIN”. Some of the search results are for commercial sites that charge for obtaining an EIN – which is legal, but unnecessary. We advise anyone to go directly to www.irs.gov and get their EIN for free.

Here is what the IRS had to say in the Summer 2003 Edition regarding how to obtain an EIN online:

The IRS has rolled out yet another way to apply for an employer identification number (EIN). It is the new Online EIN application and features:
  24×7 availability
  NO registration required
  NO paper sent to the IRS

Once the online form is completed, a preliminary validation is performed that lets the user know if any information the IRS needs wasn’t included. An EIN will be issued after the successful online submission of the completed Form SS-4.

Users are urged to print their SS-4 application after the EIN is assigned and keep a paper copy for their records. To do this, just click the “Print Form” button after receiving the EIN. This provisional EIN may be used immediately to file tax returns. The IRS will review the application for completeness and verify that a new EIN is needed. Users will receive a confirmation notice, CP 575, within two weeks.

Attention Third Parties: You may request EINs via the Internet on behalf of your clients. However, you must keep a copy of the Form SS-4, signed by the client, in your business files. Please note that there are a few limitations. The following request types cannot use the Internet application:

• Requests from addresses outside the continental USA, Alaska and Hawaii
• Limited Liability Company without type of entity
• Real Estate Mortgage Investment Conduits (REMIC)
• State and Local Governments
• Federal Government/Military Entities
• Indian Tribal Governments or Enterprises

To apply online go to www.irs.gov/businesses/small and click on “Online Application – Form SS-4. Note: There is no limit to the number of EIN requests that can be requested at one time.

You can access the online application here as well as information about EINs here.

By the way, did you know about this page here with links to pages for all 50 states containing information on doing business in the applicable state, taxation, links for employers, and more?

CNNMoney.com is reporting: “House backs IBM pension ruling.” According to the article:

The House of Representatives voted 237-162 Tuesday to prohibit the government from trying to use regulations to overturn a court case that ruled against the cash balance pension plan of International Business Machines Corp.

The move echoed a vote the House took a year ago. But the sponsor of both measures, Rep. Bernard Sanders, an Independent from Vermont, argued that Congress should weigh in on the subject again to make clear its opposition to cash balance plans that do not include protections for older workers.

Opponents of the measure charge that Sanders is trying to “enshrine in law a flawed court case,” and warned that such a measure would undermine pension plans generally:

“Given the growing reluctance of business to sponsor additional defined benefit plans, this amendment is just one more reason for companies to walk away from this type of pension,” [Rep. Sam] Johnson said.

The Wall Street Journal (subscription required) also reports on the development: “House Votes to Bar U.S. Intervention On IBM Pensions.”

You can access the legislation here. The language of the amendment reads as follows:

None of the funds appropriated by this Act may be used to assist in overturning the judicial ruling contained in the Memorandum and Order of the United States District Court for the Southern District of Illinois entered on July 31, 2003, in the action entitled Kathi Cooper, Beth Harrington, and Matthew Hilleshein, Individually and on Behalf of All ThoseSimilarly Situated vs. IBM Personal Pension Plan and IBM Corporation (CivilNo. 99-829-GPM).

You can read about the amendment in this previous post here. (For background on the cash balance plan controversy, previous posts on the topic are here and here.)

The Department of Labor (DOL) announced that it has published draft regulations that interpret the Uniformed Services Employment and Reemployment Act of 1994 (USERRA). The regulations are in Question and Answer format. Here is a list of the Q & A’s pertaining to benefits:

Health Plan Coverage

1002.163 What types of health plans are covered by USERRA?
1002.164 What health plan coverage must my employer provide to me under USERRA?
1002.165 How do I elect continuing health plan coverage?
1002.166 How much do I have to pay in order to continue my health plan coverage?
1002.167 If my coverage was terminated at the beginning of or during my service, does my coverage have to be reinstated upon my reemployment?
1002.168 Can I elect to delay reinstatement of my health plan coverage until a date after the date I am reemployed?
1002.169 Which employer is responsible for providing me with continuing health plan coverage if I am enrolled under a multiemployer plan?

Pension Plan Benefits

1002.259 How does USERRA protect my pension benefits?
1002.260 What pension benefit plans are covered under USERRA?
1002.261 Who is responsible for funding any plan obligation to provide me with pension benefits?
1002.262 When is my employer required to make the plan contribution that is attributable to my period of military service?
1002.263 Am I required to pay interest when I make up my missed contributions or elective deferrals?
1002.264 Am I allowed to repay my account balance if I withdrew all or part of my account from the pension benefits plan before becoming reemployed?
1002.265 If I am reemployed with my pre-service employer is my pension benefit the same as if I had remained continuously employed?
1002.266 What are the obligations of a multiemployer pension benefit plan under USERRA?
1002.267 How is my compensation during my period of service calculated in order to determine my pension benefits, if my benefits are based on my compensation rate?

The release notes that “more than 420,000 citizen-soldiers have been mobilized since 9/11.” According to the release, the action by the Department represents the “first time regulations have been developed to help enforce USERRA since passage of the law in 1994” and constitutes “the latest in a series of proactive steps the department has taken to ensure job security for the largest group of mobilized National Guard and Reserve service members since World War II.” The release quotes Secretary of Labor Elaine Chao as follows:

“This is a major step in ensuring that the brave men and women who are risking their lives to preserve freedom and democracy have their jobs and benefits protected when they return home,” said Secretary of Labor Elaine L. Chao. “These regulations will spell out the rights of our returning service men and women and the responsibilities of employers to honor their service. This Administration will back up these first— time—ever USERRA regulations with aggressive outreach and enforcement.”