Category: Benefits

From a CNN article–“Tax reform panel offers two proposals“—-a summary of some of the Tax Reform Panel’s key recommendations for reforming the tax code (benefits-related recommendations are bolded):

• Cut the number of income tax brackets from six to four – 15 percent, 25 percent, 30 percent and 33 percent.
• Eliminate the marriage penalty.
• Revamp capital gains taxes so that stocks and dividends would only be taxed at the individual level, not the corporate one, too.
• Eliminate deductions for state and local taxes.
• Limit the home mortgage deduction.
• Expand the capital gains exclusion on home sales from $500,000 to $600,000 for couples.
• Cap the amount of tax-free money an employer could pay for a workers’ health insurance plan to $11,500 for families. Anything paid above that threshold would be treated as taxable income to the worker.
• Reduce the variety of tax-advantaged retirement and health savings plans to just three types: “save for retirement” accounts, which would replace IRAs and deferred compensation plans; “save for work” accounts, which would replace employer-provided retirement savings plans like 401(k)s; “save for family” accounts, which would replace health savings, medical savings and flex-spending accounts.
• The simplified plan would also abolish the alternative minimum tax (AMT), a move estimated to cost the federal government $1.2 trillion in revenue over 10 years.

More details about the savings account proposals from SmartMoney.com here. Excerpt:

The plan also seeks to revamp the myriad of tax-preferred savings accounts into three basic accounts. New “save for work” accounts would replace employer-provided savings plans such as 401(k) plans. All workers would be automatically enrolled into these plans.

New “save for retirement” accounts would replace all current individual retirement accounts, Roth IRAs, deferred compensation plans and tax-free buildup of life insurance and annuities. These would be structured like Roth IRA accounts, with a maximum $10,000 contribution a year. Taxpayers could only withdraw from it on retirement after the age of 58 and on death or disability.

New “save for family” accounts would replace health savings, medical savings and flexible spending accounts. These would have a $10,000 contribution limit with withdrawals limited for education, health expenses, purchase of a new home or retirement. Individuals could also withdraw $1,000 a year without penalty.

Read more about the recommendations here at RothCPA.com. The TaxProf Blog has compiled reaction to the recommendations here and here.

From the TaxGuru.net: “What a retirement plan is not.”

UPDATE: More related humor here.

Gloom and doom is predicted for the benefits world in this article from the LATimes.com: “U.S. Labor Is in Retreat as Global Forces Squeeze Pay and Benefits.” The thrust of the article is that as companies seek to compete globally, they will continue to slash wages and benefits–health care benefits, pension benefits, and others–“in order to come closer to what the rest of the world gets.” The article notes the irony of Delphi’s website which still currently states that Delphi “offers its full time employees world class benefits.” Due to its recent bankruptcy filing, the article reports that Delphi workers will be asked to take pay-cuts equal to two-thirds of their salaries, with benefits cuts as well:

. . . Delphi workers in the United States, management says, must earn something closer to what the rest of the world gets.

Vacations reportedly will be slashed from six weeks to four weeks. Healthcare premiums will be higher. The company’s pension contributions will be lower. Paid holidays will shrink from 17 a year to as few as 10. And wages will fall sharply, to as low as $10 or $12 an hour. Those levels would make it unlikely that Delphi workers would be able to afford the cars they’re helping to build.

Robert S. Miller, the restructuring specialist brought in this summer to run the company, . . . described the process as akin to a storm. “Globalization has swept over them,” he said at a news conference.

It’s a storm that has ravaged other American industries. “This is death by a thousand lashes . . . “

UPDATE: More on the subject from Wharton: “A Bumpy Road for Delphi, GM and U.S. Auto Workers.” The article refers to what’s happening in benefits as a “seismic shift in the pension and healthcare landscape.”

I have added the Rollyo Benefits and ERISA Searchbox to my sidebar on the right (scroll down). (Still trying to tweak the visual appearance of it.) Read about the Searchroll here. I have some additional benefits Searchrolls in mind which I intend to add as time permits.

The U.S. Department of Labor’s Employee Benefits Security Administration today announced that it has launched a Web site providing contact information on employee benefit plan sponsors whose operations have been disrupted by Hurricanes Katrina and Rita. Employers who sponsor benefit plans are being encouraged to update their contact information with the department if it has changed so that “employees, plan participants and their families, as well as the many other support organizations assisting victims of the hurricanes, to reach plan administrators with questions and information related to their retirement and health benefits.”

The Website includes a searchable data base that lists pre-hurricane contact information garnered from the Form 5500 Annual Reports filed previously by all employee benefit plans located in the affected disaster areas. Employers/plan sponsors who wish to update or correct their contact information included on the database may do so by calling toll free 1.866.444.EBSA (3272) and submitting a Verification of Contact Information Form.

Also, the IRS has provided a summary of laws governing Hurricane Katrina relief under KETRA: “Tax Favored Treatment for Early Distributions from IRAs and other Retirement Plans for Victims of Hurricane Katrina.”

From Reuters.com, “U.S. Senate leader to keep trying on pension bill“:

Senate Majority leader Bill Frist said on Monday he would keep trying to revive stalled legislation to reform the funding of corporate pensions.

But another senator who held up consideration of the bill earlier this month, Ohio Republican Mike DeWine, was still blocking the legislation on Monday, and it was unclear how the impasse could be resolved.

“We will continue to work for consent on pensions,” Frist told the Senate as the chamber resumed work after a one-week recess. The Tennessee Republican called the pension proposal a “critical piece of legislation.”

. . . Meanwhile Sen. Mike Enzi, a co-sponsor of the blocked pension reform bill, is threatening to use a piece of budget legislation to dramatically raise insurance premiums paid to the PBGC.

The proposal to raise premiums is due to come to a vote on Tuesday in the Health, Education, Labor and Pensions (HELP) Committee chaired by Enzi, a Wyoming Republican. It would raise PBGC premiums to $46.75 per participant, per year, from the current $19.

The blocked pension reform bill would raise insurance premiums to $30 per plan participant.

PlanSponsor.com reports that “the proposal would also force companies that give over their pension plans in bankruptcy to pay a special premium – $1,250 per plan participant, in each of the first three years after emerging from bankruptcy, according to a summary of the proposal released by HELP committee aides.”

The IRS has announced the 2006 Pension Plan limitations in IR-2005-120. Here is what the new table in the sidebar will look like based upon the new limits:

From Newsday.com, City rebuffs large retailers in health care bill. Excerpt:

New York City became the first place in the nation yesterday to approve a law, a version of which is on the verge of becoming adopted in Suffolk County, that requires large, non-unionized retailers such as Wal-Mart to set aside money for employees’ health care costs

The New York City Council voted 40-2 (with two abstaining and seven absent) yesterday to override Mayor Michael Bloomberg’s veto of the bill, the Healthcare Security Act, which requires certain retailers to contribute to their employees’ health care costs. They would have to pay the average amount that others in the industry pay per employee.

More from the New York Times here:

In a separate vote, the Council overrode another mayoral veto, passing a law that requires larger groceries and stores with food departments to provide a set level of health care benefits to their workers. It has been called an anti-Wal-Mart measure, based on criticism that Wal-Mart’s employee health benefits are inadequate. Bloomberg administration officials said the Council overstepped its authority because federal law prohibits municipalities from regulating the terms of employee health care plans.

The Philadelphia Inquirer reports:

Other places may follow suit.

Maryland lawmakers passed a bill this year requiring companies with more than 10,000 employees to either spend at least 8 percent of their payroll on health-care benefits, or pay more into a state health-care fund. The proposal was vetoed by Gov. Robert Ehrlich, but backers believe they have the votes to override it this winter.

The AFL-CIO has been promoting a tweaked version of the Maryland bill elsewhere and expects versions of it to debut in 35 to 40 state legislatures next year, said the labor federation’s legislative issues coordinator, Naomi Walker.

Lawmakers in Suffolk County, N.Y., on Long Island, also recently approved an ordinance that would require large grocery retailers to give workers a health-care benefit worth at least $3 an hour. The plan is awaiting approval from Suffolk County Executive Steve Levy, who is “leaning toward supporting it,” according to his spokesman, Ed Dumas.

The question raised is whether such laws will survive an ERISA challenge. See some great resources here from the California Health Care Foundation discussing the interplay of ERISA and a California law mandating health coverage which would have gone into effect if voters in California had not struck it down.

Wouldn’t the IRS just love it if folks got excited about paying their taxes? A very famous 16-year-old thinks it’s cool! From the TimesOnLine.com—Composed Wie not heavily taxed by cares of adult life. Excerpt:

The twinkling eyes are the same. So is the gosh-golly charm and the dangling earrings that are as long as the head of her putter. Michelle Wie looks, sounds and says that she feels the same now that she is 16 as she did when she was 15, which is to say that she remains the composed youngster who has the world of golf at her feet.

But when a cake for her was wheeled in on Tuesday, the candles were lit and a spontaneous chorus of Happy Birthday arose from well-wishers, the reality hit home. The precocious athlete who is competing in the Samsung World Championship this week, her first event as a professional, had become old enough to drive a car and to fulfil other duties as a citizen. In time, these will cause her to groan inwardly, but in this, like so much else, Wie is effervescently different. “I’ve just got my first tax form,” she said, giggling. “It’s not something you should be excited about, but I thought it was pretty cool.”

The President’s Advisory Panel on Federal Tax Reform is getting ready to recommend capping the employer’s deduction on employer-provided health insurance as reported here by KaiserNetwork.org. Excerpt:

Under the current tax code, employers can take a deduction for health insurance provided to employees and workers pay no tax on the value of the coverage. However, some experts have said that those provisions benefit higher-income employees and contribute to the number of uninsured, the AP/Arizona Republic reports (Dalrymple, AP/Arizona Republic, 10/12). In fiscal year 2005, the exclusion of contributions for health insurance premiums and medical care from employee income cost the U.S. Treasury $112 billion in revenue, according to the Office of Management and Budget. Panel member Timothy Muris, a professor at the George Mason School of Law and a former head of the Federal Trade Commission, said that the federal government should cap employer-sponsored health insurance tax deductions at $11,000 annually for family coverage (Guy Matthews, Wall Street Journal, 10/12). Panel members could not agree on whether the proposed cap should apply to employers or employees (AP/Arizona Republic, 10/12). The cap likely would affect only the most comprehensive employer-sponsored health plans. A September survey conducted by the Kaiser Family Foundation found that the average annual premium for family coverage was $10,880.

A Wall Street Journal article reports that the tax break provided to employers for health insurance is “the single largest tax break in the federal budget” according to the Tax Policy Center.