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Small Business Employee Benefits and HR Blog

The 2007 Proposed Section 125 Regulations are Final!

Over at ZaneBenefits.com, we are getting ready to release a new product next week that allows an employer to reimburse an employee for the taxes that employee pays on his or individual policy(s). The product is a Section 125 plan for individual polices that we have talked a lot about over the last year.

Some health insurance agents and tax-professionals are doubting the legality of the August 2007 Proposed Section 125 Regulations that make this product legal under the Internal Revenue Code. 

So, the purpose of today's post is to confirm that the 2007 Proposed Sectionsection 125 guidelines 125 Regulations are final.  Below, I first outline how Proposed Treasury Regulations work and then list the applicable parts of the new Section 125 regulations.  If, after reading the below explanation, you remain unconvinced, please contact the IRS.  

How it works

All Proposed Treasury Regulations are drafted by the IRS and published in the Federal Register so that taxpayers may submit written comments or speak at hearings (during the "notice and comment period") before final regulations are published in the Code of Federal Regulations.  The Proposed Regulations become effective when they are published in the Federal Register.  After the notice and comment period (which is defined in the Federal Register publication), the IRS publishes final regulations. Taxpayers may rely on proposed regulations for planning purposes if there are no applicable final or temporary regulations in force and there is an express statement in the proposed regulations that taxpayers may rely on them currently.
 

Applying this to the new Section 125 regulations

The Section 125 Proposed Treasury Regulations were published in the Federal Register on August 6, 2007 (click here to access the Federal Register publication) with an effective date of January 1, 2009.

The notice and comment period for this Federal Register publication ended on November 15, 2007.
 
The proposed regulations state: "Taxpayers may rely on these regulations for guidance pending the issuance of final regulations".

The proposed regulations were effective immediately upon their publication in the Federal Register. While the "final" regulations are currently not available online at the Code of Federal Regulations, they are expected to be made available.

According to the Federal Register publication, the IRS contact person for these new regulations is "Mireille T. Khoury".  Mireille can be reached at 202-622-6080.
 
The Comprehensive Guide to the Small Business HRA
 

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