Fringe benefits subject to complex new antidiscrimination rules by Tax Reform Act

Article Abstract:

The Tax Reform Act of 1986 defines highly compensated employees and imposes rules to prevent fringe benefit plans from favoring highly compensated employees. The Act establishes two tests for meeting nondiscrimination requirements, an eligibility test and a benefits test. The eligibility test has three parts: 50 percent of the employees eligible to participate in the plan must not be highly compensated; 90 percent of the employees who are not highly compensated must be eligible to participate in the plan; and the plan must not contain any eligibility provision that discriminates in favor of highly compensated employees. The benefits test requires that the average benefits received by non-highly compensated employees must be at least 75 percent of the average employer-provided benefits received by the highly compensated employees. Exceptions to these rules are discussed.

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Protected benefits and non-discrimination tests detailed in final regulations

Article Abstract:

The IRS has issued Final Regulations regarding discrimination tests for employee benefits plans. A plan may be disqualified for discriminating in favor of highly compensated employees, even if the plan satisfies all of the technical requirements, if the plan is effectively availabLe only available to highly compensated employees. The tests for nondiscrimination in the Final Regulations and the benefits that are protected are described.

Human resource management

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Most full-time farmers not affected by adverse provisions in Tax Reform Act

Article Abstract:

The Tax Reform Act of 1986 limits deductions for prepaid farm expenses. The act also limits deductions for soil and water conservation expenditures, land clearing expenses and pre-productive period planting costs and the disposition of converted wetlands. The intent of these new provisions is to restrict the use of farming operations as a tax-shelter. The impact of the new rules on full-time farmers should be minimal.

Agriculture, Accounting and auditing, Farmers

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