In addition to the changes made to the COBRA (see http://www.bricker.com/publications/articles/1425.pdf), the American Recovery and Reinvestment Act of 2009 (ARRA) that was signed into law on February 17, 2009, contains several other provisions that affect employee benefit plans, including but not limited to the following:

  • an increase in the exclusion amounts for certain qualified transportation fringe benefits;
  • a change in withholding rates to implement the Making Work Pay credit;
  • an increase in the amount of the health continuation tax credit for Trade Adjustment Assistance recipients and extension of continuation coverage; and
  • regulation of compensation paid to certain executives of companies who accept Troubled Asset Relief Program (TARP) payments.

Qualified Transportation Fringe Benefit Increase

The Act increases the combined monthly exclusion from income for employer-provided transit passes and vanpool benefits to the same level as the exclusion for employer-provided parking. The exclusion amount for employer-provided parking is $230 per month for 2009. This provision is effective for months beginning on March 1, 2009 and ending on December 31, 2010.

Action required by Employer: An employer can now increase the amount of qualified transportation benefits offered to its employees.

Withholding Changes

The Act includes a “Making Work Pay” credit equal to the lesser of 6.2 percent of an individual’s earned income or $400 ($800 for joint filers) for 2009 and 2010. The credit is phased out at a rate of two percent (2 percent) of the eligible individual’s modified adjusted gross income above $75,000 ($150,000 for joint filers). Nonresident aliens, individuals who can be claimed as a dependent on another individual’s return and estates and trusts are not eligible for the credit. The amount of credit is reduced by the amount of certain economic recovery payments provided in the Act.

Action required by Employer: As a result of the Make Work Pay credit, the Treasury Department issued revised withholding tables that reduce withholding and increase take home pay. These revised withholding tables are to be used for the remainder of 2009. The revised withholding table can be found at: http://www.irs.gov/pub/irs-pdf/n1036.pdf.

Trade Adjustment Assistance Changes

The Act increased the credit provided to eligible Trade Adjustment Assistance (TAA) recipients, eligible alternate TAA recipients and eligible Pension Benefit Guaranty Corporation pension recipients and provided continued eligibility for the credit for family members after certain events. If your company or its employees are affected by TAA, please contact us. We can provide additional detailed information about these and other changes to TAA made by the Act.

Action required by Employer: The Act imposes dditional notice requirements.

Compensation Paid to Executives of TARP Payment Recipient Companies

The Act restricts the amount and type of compensation that can be paid to certain executives of companies that accept TARP funds. The Act also limits expenditures on luxury items and provides for the recovery of bonuses or other awards paid to certain executives if financial information is later found to be materially misleading. If your company received TARP funds or may receive TARP funds in the future, these restrictions may apply. Please contact us if you would like additional information on these provisions of the Act.