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| Editor: Melissa Vinson, CFCI | July 2002 Volume I, Issue 7 |
NUTS AND BOLTSHow to contact DataPath
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ARTICLESMake Plans to Attend DataPath's Annual Conference John Robbins, Sr., to Participate in Annual ECFC Symposium EGTRRA's Adverse Impact on DCAPs Bush Signs Trade Bill: Includes COBRA Subsidy Make Plans to Attend DataPath's Annual ConferenceLook for our announcement of the Conference's agenda and speakers. You should receive it next week. Just to arouse your interest until then, here are some highlights:
Just in case you need a little more persuasion, look at the fun things in Memphis listed elsewhere in this newsletter. DataPath to Participate in Annual ECFC SymposiumJohn Robbins, Sr. participate in a panel discussion at the 15th Annual ECFC Symposium in Reno, NV, August 14-16, 2002, and lead a session, with the help of John Robbins, Jr. The session (one of the breakout sessions on Thursday, August 15) will be "Defined Contribution Plans - Where's the Money?" with the subtitle "Why would anybody do this?". You can be sure that John will show where the money is for both TPAs and employers. The Panel Discussion, "HRAs: Business Opportunities for Administrators?", will be held during the Luncheon Buffet on Thursday. Participants are Leanne Anderson, CFCI, Crosby Benefit Systems; John Robbins, Sr., CFCI, DataPath; Miles Ross, MHM Business Services, Inc.; and Ken Smith, CFCI, FlexBen Corporation. DataPath will have a booth in the Exhibit Area. Look us up! EGTRRA's Adverse Impact on DCAPsEGTRRA's change in limits for the Dependent Care Tax Credit adversely affects Dependent Care Assistance Plans administered through § 125 cafeteria plans. Until EGTRRA changes the limits effective 2003, an employee can get a tax credit up to 30% of qualifying employment-related dependent care expenses ( $2,400 for one qualifying individual and $4,800 for two or more qualifying individuals). The percentage allowed depends on the employee's adjusted gross income, ranging from 30% for $10,000 and lower to 20% for $28,000 and up. The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) changed the limits for 2003, as shown in the Table below.
However, these changes do not extend to § 129 Dependent Care FSAs (DCAPs). The maximum an employee can elect under a DCAP remains at $5,000 ($2,500 if married and filing single). Two major problems arose from the lack of changes to DCAPs. Discrimination TestingWhen conducting the 55% test, all employees (not just the participants) are counted; however, employees making less than $25,000 can be excluded, This exclusion is designed to take out of play those employees who are likely to choose the Tax Credit. However, according to recent ECFC articles, a more realistic exclusion starting 2003 would be $40,000 . Without such an increase, a significant number of NHCEs electing the Tax Credit would be included, thus making it harder for the DCAP to pass the testing without eliminating a number of HCEs who would like to participate. Decreased Participation in DCAPsAn equal problem is the difference between the maximum $6,000 under the Tax Credit and the $5,000 maximum under a DCAP. While it is difficult to predict how many employees this would impact (because of the many variables surrounding the Tax Credit), it is safe to say that this $1,000 difference would increase the number of NHCEs electing the Tax Credit over a DCAP. ECFC's Recommended Legislative ChangesECFC is recommending the following legislative changes:
It would be great if something could be done before enrolling for 2003, but time is getting short. Bush Signs Trade Bill: Includes COBRA SubsidyOn August 6, 2002, President Bushed signed trade legislation which includes provision for direct federal subsidy to purchase COBRA health care coverage to:
The subsidies start in three months, and will pay 65% of the COBRA premiums for Eligible beneficiaries include individuals who lose their jobs due to foreign competition and retirees age 55 -64.
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