On May 22nd, the DOL once again extended the effective date of the final regulations regarding investment advice for participants and beneficiaries enrolled in individual account qualified retirement plans (including 401(k) plans) until November 18, 2009.  The final regulations had been set to take effect on March 23, 2009 until the effective date was moved to May 22, 2009 in order to provide DOL with more time to review the regulations.

Originally proposed under the Bush administration, the Office of Management and Budget, which must clear all final regulations, didn’t have time to complete its review prior to the change of administrations.  Now the DOL wishes to have six more months to complete a review of both policy and substance.

Stay tuned.

Senator Olympia Snowe (R-ME), along with Senators Jeff Bingaman (D-NM) and Kit Bond (R-MO) introduced S. 988, the SIMPLE Cafeteria Bill.  This is an excellent piece of legislation that enables needed changes to Section 125 cafeteria plans for employers in all sectors, as well as creating parity in this area for small employers.

First, a limited health care FSA carryover provision is in the bill to enable a design alternative to the IRS-created “use it or lose it” rule.

Second, dependent care FSA limits are raised for the first time since 1986 from the current $5,000 cap to $7,500 for one dependent and $10,000 for two or more dependents.

Third, small employers that are sole proprietors, sub-Chapter S corporations, partnerships, LLCs, and others would be allowed to participate in their own cafeteria plans.

Fourth, and perhaps most importantly for small employers, if the employer were willing to make a contribution to the cafeteria plan (such as an employer contribution towards health insurance), the small employer unfriendly nondiscrimination tests would be considered automatically satisfied.  To illustrate this last issue, consider the following case.  A three person firm has a Section 125 plan solely to allow for premium conversion of employee contributions to a health plan.  All three employees, including the owner, have family health coverage, and all three employees must contribute 10 percent of the health care cost.  Even though this appears to be totally nondiscriminatory since the same coverage is available to all three people, all elect the same coverage, and all pay the same cost-share, under current rules the plan fails the 25% nondiscrimination test since the owner’s premium co-share represents 33-1/3% of the plan’s contributions.  Ridiculous.

This is a well thought-out bill, and deserves support from all sectors.

One lingering question from the COBRA premium subsidy area was whether employers would need to report the subsidy on either a W-2 or 1099.

While not yet official, we have been informally told by an IRS spokesperson that there will be no employer requirement for any information reporting to either the IRS or the employee.

Stay tuned for more official guidance in this area.