"Although the IRS has not specifically announced that it will be stepping up enforcement regarding cafeteria plans, it seems inevitable," Faegre & Benson, LLP, one of the nation's l00 largest law firms, told clients in a recent alert. "As a result, employers would be well advised to pay more attention to their cafeteria plan documentation, administration and nondiscrimination testing than they may have in the past," it said. A quick look at a couple of the action steps it recommends for ensuring compliance:
u Review with your third-party administrator and your legal counsel all of your cafeteria plan documents and participant communications to see if any changes need to be made based on the new provisions in the regulations. Failure to follow your plan documents, or to have adequate plan documents, can disqualify your plan and make your employees taxable on their benefits.
u Review the methods you use for performing nondiscrimination testing of your cafeteria plan, or begin performing such tests if you haven't already. The new proposed regulations provide more detailed guidance on how and when to perform these tests. It is presumed that the IRS will begin to scrutinize plan discrimination issues more closely once the regulations are finalized.
Employers have long been confused about nondiscrimination testing that applies to cafeteria plans, which Aon Consulting explained in a recent alert consists of three separate basic tests: (i) the eligibility test; (ii) the contributions and benefits test; and (iii) the key employee test. In addition to clarification, the proposed regulations explain and create "safe harbor" conditions, said Aon.
The proposed regulations reflect recent tax law changes, Proska-uer Rose, LLP, one of the nation's largest law firms, noted in its September client alert. Among many other things, the proposed regs also clarify provisions relating to qualified and non-qualified benefits, paid time off, health savings accounts, and flexible spending account forfeitures, it said.
The IRS is accepting comments on the proposed regulations until Nov. 5, 2007. For more information, speak to your dealership's tax, benefits, or legal specialists.
New auto partnership positioned for growth
Robert L. Johnson - founder of the RLJ Companies, majority owner of the NBA's Charlotte Bobcats and founder of Black Entertainment Television (BET) - and Mack McLarty and Steve J. Landers of McLarty-Landers Automotive Group (MLAG) have announced the formation of a new business partnership to acquire and operate auto dealerships throughout the south central, southeast and midwest regions of the U.S.
The "RLJ-McLarty-Landers Automotive Partnership," based in Little Rock, plans to draw on the combined experience and expertise of its partners to become one of the country's leading, privately-owned automotive dealership groups. It is committed to the potential of creating one of the largest minority-owned automotive dealership groups in the U.S., encouraging and developing minority participation in all aspects of the business.
"This partnership is an exciting development in the automotive industry," stated Damon Lester, President of the National Association of Minority Automotive Dealers (NAMAD). "We look forward to working with this dynamic partnership to grow minority presence in automotive dealerships nationwide."
MLAG was formed in 2004, combining two longstanding American automotive families. Mack McLarty was former Chief of Staff to President Clinton.