IRS Updates Benefits Publications

March 12, 2007

The National Anthem plays in the background as a figure of Uncle Sam appears. The picture of patriotism comes to mind for some. For others, the picture of Uncle Sam, with his white hair and goatee, often dressed in red, white and blue with a top hat, bring other thoughts during this time of year – tax time. Never fear, Uncle Sam is here with some written publications to assist. The IRS recently revised two publications to assist with the preparation of taxes, Publications 969 and 15-B.

Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans, is available for preparing 2006 tax returns. It provides useful information on HSAs, HRAs, Health FSAs and Archer MSAs. There is a brief summary of each plan, including eligibility, contribution limits and distributions.

New rules applying to HSAs for 2007 are also detailed with highlights on 2006 tax changes. Some of the new items include changes brought about by the Tax Relief and Health Care Act (although additional changes from Notice 2007-22 are not addressed):

• Onetime rollovers from an FSA or HRA to a qualifying HSA
• HSA contribution limits no longer limited to the annual health plan deductible
• If an individual is eligible during the last month of the tax year, that individual is also eligible for the entire tax year for purposes of computing the amount you can contribute to an HSA
• A participant can exclude a qualified HSA funding distribution from an individual retirement account from gross income

(See News & Review article for more detailed information, www.benefitsolved.com/news/stories/new_review20070109-4.asp).

Additionally, this publication reflects recent releases from the IRS regarding debit card substantiation methods for Health FSA and HRA participants. (See News & Review article for more information, www.benefitsolved.com/news/stories/new_review20070109-6.asp). The publication includes another ruling released in 2006 on whether HRAs may pay benefits to a designated beneficiary who is not the employee, the employee’s spouse or the employee’s dependents. (See News & Review article for more detailed information, http://www.infinisource.net/news/stories/new_review20060911-4.asp).

Publication 15-B, Employer’s Tax Guide to Fringe Benefits, provides employers information on employment tax treatment of fringe benefit plans for 2007 including cafeteria and transportation plans. This includes the increase in qualified parking exclusion and commuter transportation benefits. The monthly exclusion for 2007 increases to $215 for parking and $110 for commuter vehicle transportation and transit passes. The IRS also added a section on HSAs which was not in prior editions.

Uncle Sam may call on you to pay taxes, but these publications are designed to provide important information on these tax-saving plans. Complete publications are available online, Publication 969, http://www.irs.gov/pub/irs-pdf/p969.pdf, and Publication 15-B, http://www.irs.gov/pub/irs-pdf/p15b.pdf.