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							John W. Haine, Esq., Contributing Author and Editor
Katherine J. Alexander, Esq., Contributing Author
Cheryl Risley Hughes, Esq., Contributing Author




April 27, 2010


          What’s New in the 2nd Qtr. 2010 Edition
This What’s New section highlights the changes made in the last quarter to the Fringe Benefits guidebook—the
authoritative guidebook for employers, administrators, and advisors.
Below are some highlights of the substantive changes that we made to the Outline and Appendix.
Substantive Changes to the Outline:
• Section I—Introduction. This Section has been changed to reflect our expansion of the manual to add a new Section
    V that includes an updated discussion of de minimis fringe benefits and an entirely new discussion of the no-
    additional-cost services exclusion.
•   Section II—Tax Basics for Fringe Benefits. The discussion of de minimis fringes that previously appeared in this
    Section has been supplemented and moved to new Section V.
•   Section III—Qualified Transportation Plans. We have added two new example boxes to illustrate the kinds of
    choices that employers can make when they design a qualified transportation plan’s participation rules. One example
    shows how an employer with a pre-tax compensation reduction plan could use a waiting period to delay the
    commencement of plan participation. The other example shows how a plan may be designed so that employees who
    lose their eligible employee status and their right to make pre-tax compensation reduction contributions can still be
    allowed to remain participants so they can “spend down” their account balances.
•    Section IV—Company Cars and Related Benefits. Our Section on company car benefits has been revised to reflect
    the issuance of IRS Rev. Proc. 2010-18, which updates the deduction limits for passenger automobiles first placed in
    service in 2010 and establishes the “inclusion amounts” that must be added to income in order to offset the deduction
    that employers take for high value passenger automobiles first leased in 2010.
•   Section VI—Qualified Educational Assistance Programs. This new section presents two fringe benefits that can be
    excluded from income primarily because of their low value or cost.
    – V.A—Overview. This subsection briefly explains and contrasts the two fringe benefit exclusions addressed in
      this Section.
    – V.B—De Minimis Fringes. Our discussion of the de minimis fringe exclusion (moved from Section II) has
      been updated to cover a recent IRS private letter ruling that offers a detailed look at the three-part analysis the
      IRS uses to determine whether the requirements of the de minimis fringe exclusion are met.
    – V.C—No-Additional-Cost Services. This entirely new subsection provides a detailed look at the federal income
      and employment tax exclusion for no-additional-cost services, which are common in the airline, hotel, and
      telecommunications industries, but are used by a variety of other employers. Our discussion of no-additional-
      cost services fringe benefits examines each characteristic that a service must have to qualify for the exclusion.
      We explain the rule that makes the exclusion unavailable if the employer incurs substantial additional costs.
      We also consider the potential ERISA consequences of no-additional-cost services for retirees, and the special
      rule under which reciprocal agreements may allow the employees of one employer to get a no-additional-cost
      service from another employer in the same line of business.
•   Section IX—Qualified Adoption Assistance Programs. Our section on adoption assistance programs has been
    revised throughout to reflect the Health Care Reform Law’s changes to the rules for employer-provided adoption
    assistance programs and the adoption tax credit. Those changes include increases for 2010 and later years in the
    amount of the available credit and exclusion, changes to the tax credit to make it refundable, and an extension of the
    EGTRRA sunset date for adoption benefits to December 31, 2011.
Fringe Benefits Quarterly Update
2nd Qtr. 2010
Page 2

•       Section XI—Qualified Employee Discount Programs. A variety of changes have been made to this section,
        including changes designed to highlight the applicable definition of “employer” and to clarify the complex rules
        regarding determination of the customer price when an employer offers different discounts to discrete customer
        groups.
•       Section XIV–Group Term Life Insurance. Our coverage of group term life insurance plans has been updated to
        reflect the provisions of the Health Care Reform Law that authorize the creation of simple cafeteria plans. Those rules
        allow a group term life insurance plan to avoid the usual nondiscrimination requirements under Code § 79(d) if the
        insurance is offered through a simple cafeteria plan.
•       Section XV–Vacation/Paid Time Off (PTO) Plans. Our discussion of the tax consequences when vacation/PTO is
        automatically used to pay for retirement health benefits has been updated to reflect a recent IRS private letter ruling
        which concluded that the fair market value of coverage for individuals (including domestic partners) who are not
        spouses or tax dependents must be included in the gross income of the employee.
•       Appendix Tabs.
        – Several changes have also been made to the Appendix Tabs, including revisions reflecting changes made by
          the Health Care Reform Law to the statutes affecting adoption assistance programs and the adoption tax credit.


    •      Tab 3—Adoption                                          •    Tab 11—Miscellaneous
          – Updated Code § 36C (formerly Code § 23)                     – Updated the Table of Plan Limits and the
            and Code § 137 for the Health Care Reform                     Phone Numbers of Government Contacts
            Law
    •     Tab 7—Other Fringe Benefits
          – Updated Code § 125 for the Health Care
            Reform Law




        Lots More to Come! From the feedback we’ve received, we know that our manuals are the premier group health
        plans resources in the country. But here at EBIA we’re not satisfied. We are constantly striving to make the manual
        even better. In upcoming editions, look forward to complete coverage of all legal developments affecting fringe
        benefits, and to our further analysis of existing law, with more examples and Q/As, etc.
        EBIA Weekly. Keep up with new legal developments as they occur: sign up now for the EBIA Weekly, a free
        email newsletter, at www.ebia.com.

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