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 //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.