The Internal Revenue Service has developed a benefit plan review schedule that could affect the calendars of insurers, benefit plan advisors and employers for decades to come.

The IRS has published the schedule in Revenue Procedure 2005-66, which deals with the system it will use to issue the rulings and “determination letters” that help plan sponsors and administrators get IRS approval for plan changes.

Under the new system, the IRS will review changes proposed for individually designed plans every 5 years and plans for “pre-approved plans,” which are officially called “volume submitter plans” and “master and prototype plans” every 6 years, according to the text of the revenue procedure.

The IRS will use employers’ employer identification numbers, or EINs, to determine when they should submit routine requests for rulings and determination letters.

The IRS will issue annual lists of changes in rules and regulations to help plan sponsors and administrators decide what changes to include in plan updates.

When new pre-approved plans file for approval outside of the usual submission periods for plans with their EINs, the IRS will use the cumulative list of changes that would have applied if the plans were being reviewed “on cycle” during the most recently expired submission periods that would have applied to those plans if the plans were established plans, the IRS says.

The revenue procedure is on the Web at http://www.irs.gov/pub/irs-drop/rp-05-66.pdf.

In another development, the IRS wants to keep employers from using the new health savings account programs to favor some employees over others.

The IRS has proposed regulations that would set guidelines requiring employers that contribute to HSAs to make comparable contributions for all workers in a given class of employees.

The HSA program lets individuals who buy high-deductible health coverage fund routine health care costs by deducting contributions to HSAs and excluding HSA distributions used to pay for health care from taxable income.

Employers can deduct HSA contributions from their own taxable income, but the HSA law imposes some restrictions on employer-sponsored HSA programs.

In the proposed regulations, the IRS says an employer must make “comparable contributions” to all members in a class of employees who join the employer’s HSA program. To make “comparable contributions,” the employer must contribute either the same amount of cash or the same percentage of the deductible to each HSA program participant’s HSA, Barbara Pie, an IRS tax exempt entities specialist, writes in a preamble to the proposed regulations.

The IRS is proposing a plain vanilla approach to employee classes.

An employer could put full-time workers, part-time workers and former workers in separate classes, and it could set different contribution rates for employees with individual coverage and with family coverage.

Because the IRS does not consider sole proprietors or partners at a company to be company employees, companies do not have to apply the comparability rules to sole proprietor or partner HSA contributions, Pie writes.

But the employer could not distinguish between union employees and non-union employees, or between new employees and established employees, Pie writes.

The employer could not tie HSA contributions to employee participation in wellness programs, “because if all comparable participating employees do not elect to participate in all the programs, they will not receive comparable contributions to their HSAs,” Pie writes.

Pie notes that a guidance issued in 2004 already states that employers cannot match employees’ HSA contributions. At an employer with an HSA contribution matching program, “if all comparable participating employees do not contribute the same amount to their HSAs, they will not receive comparable [employer] contributions to their HSAs,” Pie writes.

The IRS has posted a link to a copy of the proposed regulations on the Web site of its parent, the U.S. Treasury Department, at http://www.treasury.gov/press/releases/reports/reg_13864704_.pdf.

In another development, the IRS is fighting the 9th U.S. Circuit Court of Appeals over the deductibility of some dividends that employers pay to employee stock ownership plans.

The battle could affect employers that lay off workers then use ESOP stock buybacks to cash workers out of the ESOPs.

The San Francisco-based 9th Circuit Court ruled in 2003 that employers can deduct dividends used to buy their own stock from affiliated ESOPs. The 9th Circuit ruling, issued in connection with Boise Cascade Corp. vs. United States, has the force of law in Alaska, Arizona, Hawaii, Idaho, Nevada, Oregon and Washington as well as in California.

But IRS officials argue in the preamble to new proposed regulations that the 9th Circuit interpretation could hurt employees, by exposing employees who belong to ESOPs to involuntary cash-outs and unexpected tax bills.

The proposed regulations would repeat the IRS position that sections 162(k) and 404(k) of the Internal Revenue Code forbid employers from deducting payments made in connection with stock buybacks from affiliated ESOPs, according to John Ricotta, an IRS tax exempt entities specialist, and Martin Huck, an IRS corporate taxation specialist.

The regulations are supposed to take effect 90 days after the IRS publishes the proposed draft in the Federal Register.

Even before the date the regulations take effect, “the IRS will continue to assert in any matter in controversy outside the 9th Circuit that sections 162(k) and 404(k) disallow a deduction for payments to reacquire employer securities held by an ESOP,” Ricotta and Huck write in the preamble to the proposed regulations.

The 9th Circuit held that employers could deduct dividend payments used to buy company stock back from ESOPs because the employer’s move to pay dividends to the ESOP and the ESOP’s move to pay the cash to the plan participants were 2 separate transactions.

But the IRS argues that, in addition to being bad for employees, allowing dividend deductions for ESOP stock buybacks is bad tax law. Allowing the deductions lets employers claim deductions both when they contributed stock to ESOPs and again when they paid to redeem the same stock, Ricotta and Huck write.

The IRS has posted a link to a copy of the proposed regulations on the Web site of its parent, the U.S. Treasury Department, at http://www.treasury.gov/press/releases/js2693.htm.

The IRS also has proposed regulations that would set guidelines requiring employers that contribute to HSAs to make comparable contributions for all workers in a given class of employees