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Small Business Jobs Act Provisions Affect Employment Benefits

Date: 9.27.2010

President Barack Obama has signed the Small Business Jobs Act of 2010 (H.R. 5297) into law on September 27, 2010.  The bill contains the following benefits-related provisions of interest to employers:

  • The bill removes the requirement that cell phones meet certain heightened substantiation requirements and depreciation rules.  This change clears the way for the Internal Revenue Service to issue rules of administrative convenience with respect to the taxation of the personal use of employer-provided cell phones.  Note that this change does not affect the authority of the Internal Revenue Service to determine the appropriateness of cell phones as a tax-free working condition fringe benefit or that the personal use of such devices, provided primarily for business purposes, may constitute a tax-free de minimis fringe benefit.
  • The bill allows participants in Section 457 governmental deferred compensation plans to treat elective deferrals as Roth contributions, effective for taxable years beginning after 2010.
  • The bill allows rollovers from elective deferral plans to Roth designated accounts, effective for distributions made after the date of enactment. 
    • Specifically, it provides that if a section 401(k) plan, section 403(b) plan, or section 457(b) governmental deferred compensation plan has a qualified designated Roth contribution program, when there is a distributable event, a distribution to an employee (or a surviving spouse) from an account under the plan that is not a designated Roth account is permitted to be rolled over into a designated Roth account under the plan for the individual. 
    • A plan that includes a designated Roth program is permitted but not required to allow employees (and surviving spouses) to make the rollover contribution described above to a designated Roth account. If a plan allows these rollover contributions to a designated Roth account, the plan must be amended to reflect this plan feature. It is intended that the IRS will provide employers with a remedial amendment period to allow the employers to offer this option to employees (and surviving spouses) for distributions during 2010 and then have sufficient time to amend the plan to reflect this feature.

Jackson Lewis attorneys are available to answer inquiries regarding this and other workplace developments.