FRINGE BENEFITS
Firms get an extra year to switch to debit cards to pay commuting benefits. Earlier, IRS had said that beginning Jan. 1, 2010, employers in localities with transit card systems would no longer be allowed to pay those benefits in cash. Now the Service says employers will still have the option of using cash or debit cards until 2011. The additional time is needed because many local
mass transit systems still need more time to make changes to conform to IRS rules for debit card usage. With debit cards, workers can get transit benefits without substantiating expenses, but the card must be one they can use only in a transit system or parking facility.
Companies can’t avoid unrelated business tax on earnings in VEBAs ... voluntary employees’ beneficiary associations. Employers use VEBAs to pay claims for health and accident benefits of employees, their spouses and dependents.
In this case, a firm’s fully funded VEBA earned over $2.5 million
on its investments and paid out more than $7 million in benefit claims. The company tried to argue that the investment earnings were exempt because they were used to pay benefits, but that was rejected by an Appeals Court. The income tax exemption is allowed only in cases when the VEBA is underfunded and the earnings on the investments are used to help pay claims (CNG Transmission Management VEBA, Fed. Cir.).
Firms get an extra year to switch to debit cards to pay commuting benefits. Earlier, IRS had said that beginning Jan. 1, 2010, employers in localities with transit card systems would no longer be allowed to pay those benefits in cash. Now the Service says employers will still have the option of using cash or debit cards until 2011. The additional time is needed because many local
mass transit systems still need more time to make changes to conform to IRS rules for debit card usage. With debit cards, workers can get transit benefits without substantiating expenses, but the card must be one they can use only in a transit system or parking facility.
Companies can’t avoid unrelated business tax on earnings in VEBAs ... voluntary employees’ beneficiary associations. Employers use VEBAs to pay claims for health and accident benefits of employees, their spouses and dependents.
In this case, a firm’s fully funded VEBA earned over $2.5 million
on its investments and paid out more than $7 million in benefit claims. The company tried to argue that the investment earnings were exempt because they were used to pay benefits, but that was rejected by an Appeals Court. The income tax exemption is allowed only in cases when the VEBA is underfunded and the earnings on the investments are used to help pay claims (CNG Transmission Management VEBA, Fed. Cir.).
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