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Free eNewsletter & Special Promotions
Volume 3, Issue 4, July 2005
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IRS Issues Grace Period for Flexible Spending
Account Balances
Employees who have contributed to cafeteria plans may have more time to use up their balances still available at the end of the plan year. The IRS and Treasury Department have issued Notice 2005-42, which permits employers with flexible spending accounts (FSAs) to establish a grace period for employees to be reimbursed for expenses incurred for qualified health care and dependent care.
Under the old Section 125 regulations, cafeteria plans bar employees from carrying over unused contributions into the next plan year. A plan was able to allow employees additional time after the end of a plan year to turn in claims for expenses incurred during the prior year (usually 60 to 90 days). However, as a result of the new regulations, employers may now allow employees to use up their unused balances from the prior plan year with expenses incurred during the 2 1/2 month period immediately following the end of the plan year. Notice 2005-42 effectively extends the “use it or lose it” deadline, giving employees up to 14 1/2 months to incur qualified expenses.
Employers have until the end of the plan year to amend their current plans to allow for the grace period. An extension to the deadline for reimbursement of qualifying expenses can make the FSA more attractive to employees. Employers, however, are not required to amend their plans to allow for the 2 1/2 month grace period. Because extending the grace period will result in costs incurred by the plan in terms of lower year-end forfeitures, more complicated administration for the plan year end, and new plan year processing, it is important for employers to weigh the impact of instituting this change.
If you would like more information about the impacts of Notice 2005-42 on your existing cafeteria plan or would like help getting a plan started, Kemper CPA Group LLP can help – contact us today!
As if Summer gas prices weren’t cause for enough concern, there’s something else to be cautious about – using your debit card. When you use a debit card at the pump to fill up and don’t use your PIN, the gas station can block anywhere from $1 to $75 of your checking account, in addition to the amount of your fuel purchase. The block at the gas pump is similar to those that credit card companies have been using for years – whenever you use your credit card to check into a hotel, and the exact amount of your stay is unknown, for example, the hotel will issue a block on your card to secure an adequate payment.
The gas station does not remove the block on your debit card until the end of the day, or, in some cases, for several days until it does a batch transaction. If the block is not removed the same day as the transaction occurred, there is the potential for the blocked money to cause bounced checks, overdraft fees, and big headaches.
If you regularly maintain a low checking account balance or if you have several debit cards on the same account, you should pay particular attention to the blocks issued against your card. You can also better protect yourself by going into the station to use your PIN, and no block will be placed on your account. Fortunately, if you incur overdraft fees as a result of a block on your checking account, many banks will refund your account. Check with your bank to determine its policy on debit card blocks.
Are you applying for a mortgage or student loans? Lenders may want a copy of your tax information. Individuals who would like copies of their federal tax information can request transcripts directly from the IRS either by phone or by mail. Taxpayers can either call 1-800-829-1040 or fill out IRS Form 4506T and send it by mail. The IRS does not charge a fee for the service, and transcripts generally arrive within two weeks.
The IRS allows you to request either a tax return transcript or a tax account transcript. Tax return transcripts show most line items on your tax return as it was originally filed, including accompanying forms and schedules. Tax account transcripts show any adjustments that you or the IRS made after the tax return was filed.
It used to be possible to count on retiree-benefits plans to cover the cost of medical expenses during retirement, but that is no longer the case. Fewer employers are offering medical insurance to retirees, and the companies that do still offer benefits are cutting benefits and raising both premiums and co-payments. Increasing numbers of retirees are now facing a gap in coverage between their retirement dates and their eligibility for Medicare, leaving some in dire financial straits.
As a result, it is imperative that workers facing retirement plan now for impending medical costs. Several options exist for funding medical costs during retirement:
| • | Scale back your hours with your current employer to retain medical coverage. |
| • | Seek employment in a less-demanding position that still offers benefits. |
| • | Secure a private insurance plan prior to retiring. |
| • | Utilize COBRA for up to 18 months after retirement, at which time you are eligible for a HIPAA policy. |
| • | Start a savings plan and mentally designate it for medical costs after retirement. |
| • | Put money away in an isolated investment fund. |
| • | Build a reserve medical fund by taking advantage of a Health Savings Account (HSA) if your employer offers one – contributions to an HSA are tax-free, as are withdrawals if you use the money for health care. |
Planning for the impacts of medical care during your retirement is an essential part of retirement planning. It is important to prepare for medical costs now, so you can spend less time worrying about finances and more time enjoying your retirement. Kemper CPA Group LLP offers a host of retirement planning services – contact us today!
The July/August 2005 issue of the "Loose Change" Newsletter includes the following articles:
| • | A Simple Plan to Keep Finances Simple |
| • | Method Matters |
| • | High Deductible, Big Confusion |
| • | Eeenie, Meenie, Minie, Mo |
| • | Understanding Mutual Fund Lingo |
| • | Get to the Point |
| • | Investor Mistakes - Not in Our Stars, but in Ourselves |
| • | Leisure Spouse? |
| • | Pass the Test, Take the Deduction |
| • | It's a Draw |
| • | Do Some Detective Work |
| • | Don't Get Scammed |
| • | School Daze |
| • | From Pool to School |
| • | Rising Interest Rates: Boon or Bane? |
| • | Ready, Set, Inherit? |
| • | Can the Early Bird Get a Good Retirement Deal? |
| • | Wallet Woes |
Contact us today for all of your investing needs.
Investment advisory services offered by KCPAG Financial Advisors LLC, a registered investment advisor. Securities offered through CapPro Brokerage Services, Inc., member NASD & SIPC. Insurance services offered through KCPAG Insurance Services LLC.
New versions of the Sober virus continue to circulate around the globe. Sober-Q, the newest of the virus’ 20 variations, appears to have been attacking computers still infected with the Sober-P variant, turning them into spam machines. Because thousands of computers infected with previous versions of the virus were still under the control of the virus writer, the writer was able to use the infected machines to spread hundreds of messages in German and English.
Sober-Q’s spam messages contain political propaganda or link to conservative German political sites. There are 72 variations of the spam sent by Sober-Q, and the spam easily bypasses filters because the messages come from otherwise-clean IP addresses. The Sober-Q version of the virus is not particularly dangerous; however, because of the ease with which its authors are able to manipulate the worm, it is important to be on the lookout for future variants of the Sober worm.
In order to protect yourself, keep your virus definitions up to date, ensure that you have enabled a firewall, and always be very cautious opening e-mail messages from unfamiliar senders or with suspicious-looking attachments. If you have any questions about protecting your computer or network from the Sober worm and other malicious viruses, contact Kemper Technology Consulting today. We have the solutions for your Internet security needs.
Kemper Technology Consulting
Robinson, IL
618-546-5633
www.kempertc.com
Evansville, IN • Indianapolis, IN • Paducah, KY
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