IRS Update from Employee Benefits & Executive Compensation Group

January 8, 2009


IRS Provides Transition Relief for Use of Health FSA and HRA Debit Cards

The Internal Revenue Service has issued Notice 2008-104, which extends the transition relief for the use of health flexible spending arrangement and health reimbursement arrangement  debit card use at certain drug stores and pharmacies that are not in compliance with Notice 2007-2.  The deadline for compliance is now June 30, 2009 (instead of December 31, 2008).

To view a copy of Notice 2008-104, please click here.

New Benefit for Bicycle Commuters

As of January 1, 2009, employers may reimburse employees who bike to work up to $20 per month on a pre-tax basis for bicycle commuter expenses (e.g., bicycle purchase, maintenance, and storage).  To be eligible for this new fringe benefit, the employee must bike to work for a “substantial portion” of the travel between home and work in any month, and during that month the employee may not be reimbursed for other transportation costs (e.g., parking, transit passes).

The new bicycle commuter benefit is in section 211 of the Emergency Economic Stabilization Act of 2008, which may be viewed here.

IRS Extends Deadline for 403(b) Final Regulations

The Internal Revenue Service has granted a one-year extension – to January 1, 2010 – by which 403(b) plan sponsors must have a written document in place that satisfies the requirements of the final 403(b) regulations.

Pursuant to Notice 2009-3, this one year extension is available so long as (1) the plan sponsor operates the 403(b) plan in accordance with a reasonable interpretation of the final 403(b) regulations during the 2009 calendar year, and (2) prior to December 31, 2009, the plan sponsor makes its best efforts to retroactively correct any operational failures that occur during 2009 based on the general principles of correction under the Employee Plans Compliance Resolution System.

To view a copy of Notice 2009-3, please click here.

Cycle D Cumulative List of Changes for ERISA Qualified Plans

The Internal Revenue Service has released Notice 2008-108, which contains the 2008 Cumulative List of Changes in Plan Qualification Requirements.  This cumulative list is to be used by plan sponsors of individually designed plans whose EIN ends in either 4 or 9, and multiemployer plans under section 414(f) of the Internal Revenue Code, which are required to file for a new determination letter during Cycle D (February 1, 2009 to January 31, 2010).  The list identifies a large number of statutory changes and related guidance, the compliance with which will be reviewed during the Internal Revenue Service’s determination letter process.

To view a copy of Notice 2008-108, please click here.

Department of Labor Addresses Fidelity Bond Requirements

The Department of Labor has issued Field Assistance Bulletin 2008-04, which addresses many of the issues related to ERISA’s requirement that most employee benefit plans be covered by a fidelity bond.  Field Assistance Bulletin 2008-04 is in Q&A format and addresses numerous aspects of the rules under section 412 of ERISA and its associated regulations.  For instance, Field Assistance Bulletin 2008-04 addresses who must be bonded (and who is exempt from the bonding requirement), the amount and type of coverage required, and who is responsible for compliance with the bonding requirement.  Plan fiduciaries with oversight responsibilities for plan assets speak with counsel regarding a review of their current bonding arrangements to ensure compliance with Field Assistance Bulletin 2008-04.

To view a copy of Field Assistance Bulletin 2008-4, please click here.