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- Title
New Treasury Regulations Affecting Employee Benefit Plans.
- Authors
Gartrell, P. Garth; Mailander, Edward M.
- Abstract
In the summer of 1984, Congress passed the Retirement Equity Act and the Deficit Reduction Act. This legislation is considered by many to be the most significant employee benefit legislation since ERISA. In February 1986, the IRS released its first regulations interpreting and further defining these acts. This article reviews these regulations and considers in significant detail the issues regarding group term insurance, cafeteria plans and funded welfare benefit plans and discusses their implications. Brief mention is also made of other significant changes. The recent legislative changes to group term life insurance significantly affect retirees and key employees in a discriminatory plan. The temporary regulations provide substantial new guidance with respect to which retirees are subject to more stringent rules, those plans that must be aggregated for purposes of testing for discrimination, and under what circumstances a plan will be discriminatory. After a controversial recent past, cafeteria plans are now beginning to fulfill their intended promise. Although some employee benefits specialists might disagree, the recent actions by the Treasury to stabilize the rules with respect to cafeteria plans may have saved such plans from extinction at the hands of legislators viewing the unintended gains being realized as a result of plans implemented before the Treasury's actions. Although the recently enacted Treasury regulations provide needed guidance with respect to such plans, they raise several important questions, such as when unused vacation may be cashed out and what taxable benefits may be in a cafeteria plan. Finally, the new law significantly reduces an employer's ability to deduct accruals to employee benefit plans and provides stringent new rules for funded welfare benefit plans. Although the great bulk of substantive guidance will come from the Treasury in the future, the temporary regulations provide some substantive guidance mixed in with a great deal of procedural and transitional guidance.
- Subjects
UNITED States; EMPLOYEE benefit laws; INSURANCE law; EMPLOYEE benefits; GROUP insurance; TERM life insurance; LIFE insurance; TERM life insurance policies; INSURANCE
- Publication
Benefits Quarterly, 1986, Vol 2, Issue 3, p34
- ISSN
8756-1263
- Publication type
Article