U.S. Welfare Benefit Plans: What Employers Should Be Thinking About During 2008

January 30, 2008

Cafeteria Plans - Is Your Plan In Compliance?

The IRS issued comprehensive proposed cafeteria plan regulations not too long ago which consolidate existing rules and provide some new rules. The regulations are expected to be finalized and go into effect on January 1, 2009. Thus, employers with existing cafeteria plans should undertake a review of their plans to ascertain whether and to what extent changes need to be made to comply with the regulations. Failure to comply with the regulations either in form or operation could jeopardize the favorable tax treatment of the plan for all participants. Among the guidance contained in the proposed regulations are rules regarding benefits that may be offered under a cafeteria plan, as well as benefits which may not be offered. The rules provide that a plan must be maintained pursuant to a written document, and operation of the plan must comply with the plan's written terms. The Tax Practice Group at Eaton Peabody can assist you with a comprehensive review of your existing plans and advise you as to steps needed to bring your plan into compliance with the new guidance.

Wellness Programs - New Rules Are in Effect

On January 1, 2008, final regulations on wellness programs went into effect for calendar year programs. Wellness programs are employer-sponsored programs designed to encourage employees to take steps towards healthier lifestyles in exchange for an array of incentives. These programs enjoy an exemption from HIPAA's discrimination rules, so long as the employer complies with the regulations. If you are an employer with an existing wellness program or if you are looking for ways to encourage your employees to lead healthier lifestyles by providing financial incentives for them to do so, such as lower health insurance premiums, contact the Tax Practice Group at Eaton Peabody to discuss the particulars of wellness programs and how they can benefit you.

Wrap Plans: What Are They? Do I Need One?

Employers from time to time may hear about "wrap- plans" and often wonder whether they need to implement one to ensure that their welfare benefit plans are compliant with the laws. In a nutshell, a wrap plan is intended to accomplish two objectives: first, a wrap plan is intended to provide a document that complies with the ERISA rules on welfare benefit plans. Second, a wrap plan is a way for an employer to reduce the number of Form 5500 filings it is required to make by having a single umbrella plan. With regard to ERISA compliance, it is important that employers understand that the usual documents provided by health and other insurance providers, such as benefits booklets and the like, often fail to contain essential provisions that are required to be included and communicated to employees under ERISA. Thus, a wrap plan ensures that participants are aware of the ERISA protections afforded to them and also ensures that an employer is compliant with its obligations under ERISA. With regard to Form 5500 filings, employers have the opportunity to consolidate plans into one wrap plan to reduce the number of Form 5500 filings. Careful consideration to the pros and cons of implementing a wrap plan should be undertaken before deciding to just wrap all of your plan documents into a single plan. For an analysis of whether your
existing welfare benefit plans comply with ERISA as well as an analysis of whether it would be beneficial to reduce Form 5500 filing burdens by consolidating documents into one plan, contact Eaton Peabody's Tax Practice Group.

For questions regarding the topics contained in this alert, please contact Christine Burke Worthen, a shareholder and Chair of Eaton Peabody's Tax Practice Group. 
 
  
 
 This alert is provided as general information, and is not a substitute for legal or other professional advice. 
To ensure compliance with requirements imposed by the U.S. Treasury Department and the Internal Revenue Service, we also inform you that any federal tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose.