The Washington Report
December 12, 2018
Congress Passes Short-Term Funding Bill in Nick of Time
On December 7, 2018, President Trump signed into law a stopgap bill (H.J. Res. 143) that funds the government through December 21. The House and Senate passed the bill on December 6. Unless legislators can reach agreement on the appropriation bills, the government is headed for a partial shutdown on December 22. The shutdown would potentially apply to the Department of the Treasury, in addition to the Departments of State, Interior, Homeland Security, Commerce, Agriculture, and Justice.
H.J. Res. 143 (115) is available here.
CMS Issues Final Regulations on Risk Adjustment Program for 2018 Benefit Year
On December 7, 2018, the Centers for Medicare and Medicaid Services (CMS) of the Department of Health and Human Services (HHS) issued final regulations adopting the HHS-operated risk adjustment methodology for the 2018 benefit year. In February 2018, a federal district court vacated the use of the statewide average premium in the HHS-operated risk adjustment methodology for the 2014 through 2018 benefit years, and the litigation is ongoing. The final regulations reissue the HHS-operated risk adjustment methodology that was previously established for the 2018 benefit year, with additional explanation.
A CMS news release is available here.
The regulations are available here.
IRS Provides Transition Relief From 403(b) Part-Time Employee Universal Availability Rule
Internal Revenue Service (IRS) Notice 2018-95 provides transition relief from the Internal Revenue Code Section 403(b) universal availability rule that requires a part-time employee to be permitted to make elective deferrals to a 403(b) plan once such part-time employee works 1,000 hours in any year. Some employers had interpreted the part-time rule to mean that a part-time employee could be excluded from making elective deferrals for any given year, if the employee did not work 1,000 hours in the preceding year. The relief period starts with taxable years beginning after December 31, 2008, and generally ends before December 31, 2019. A plan will not be treated as failing the universal availability part-time employee rule merely because the plan did not provide an employee with an opportunity during the relief period to make elective deferrals for each year after the year in which the employee worked at least 1,000 hours, provided certain conditions described in the Notice are met.
IRS Notice 2018-95 is available here.
IRS Releases Interim Guidance on Tax Treatment of Parking Fringe Expenses
On December 10, 2018, the Internal Revenue Service (IRS) issued interim guidance (Notice 2018-99) on the tax change made under the Tax Cuts and Jobs Act (TCJA) that generally disallowed the deduction for qualified transportation fringe benefits provided by employers to their employees for amounts paid or incurred after December 31, 2017. The guidance is intended to assist employers in determining the amount of parking expenses that is no longer tax deductible. In the case of tax-exempt organizations, the guidance should help to determine how the nondeductible parking expenses may create or increase unrelated business taxable income.
An IRS news release, IR-2018-247, is available here.
Notice 2018-99 is available here.
IRS Issues Guidance on New Code Sec. 83(i) Tax Deferrals for Qualified Stock Options and Restricted Stock Units
On December 7, 2018, the IRS issued Notice 2018-97, which provides guidance on a tax law change under the 2017 TCJA that allows certain employees to defer income tax on equity grants. Under the TCJA, which added new Code Section 83(i), qualified employees of privately held corporations may elect to defer paying income tax, for up to five years, on the income attributable to the exercise of stock options and vesting of restricted stock units (RSUs) granted to them by their employers. The grants must be made to not less than 80% of the U.S. employee population, and the plan must grant stock options or RSUs to those people within the calendar year. The IRS Notice clarifies that the 80% requirement must be met either by grants of stock options or by grants of RSUs and not by a mixture of stock options and RSUs.
Executives, highly compensated officers, and those owning one percent or more of the corporation’s stock are ineligible to make the deferral election.
The IRS is requesting comments on Notice 2018-97 and on any additional issues related to the deferral of tax on the receipt or vesting of qualified stock that future guidance should address. Comments may be submitted through February 5, 2019.
An IRS news release, IR-2018-246, is available here.
Notice 2018-97 is available here.
IRS Issues Additional FAQs on Employer Credit for Paid Family and Medical Leave
The IRS recently issued additional frequently asked questions (FAQs) on the employer credit for paid family and medical leave. The new FAQs address when the employer must have a written policy in place for the credit to be claimed, the terms of the written policy, the availability of the credit to an employer that is not subject to the Family and Medical Leave Act, and other topics pertaining to the employer credit.
The IRS’s FAQs on the employer credit for paid family and medical leave (both previously issued FAQs and the latest ones) are available here.
2019 Limits for Benefit Plans
Each year, the U.S. government adjusts the limits for retirement plans, Social Security, Medicare, and other benefit programs to reflect price and wage inflation, and changes in the law. As a result, employee benefit plans must be adapted annually to accommodate the new limits. All of the numbers in this report are official unless otherwise indicated.
The 2019 Limits for Benefit Plans document is available here.
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