In the fall of 2006, the IRS released the cost-of-living increases that apply to pension plans, including 401(k) plans. The IRS has now completed releasing 2007 inflation-adjusted figures for other fringe benefits, including employer-provided adoption assistance, health savings accounts (HSAs), and high-deductible health plans.

Employer-provided adoption assistance. For 2007, employers that have adoption assistance programs can exclude $11,390 from employees' income. This amount is phased out for high earners. In 2007, the excludable amount begins to be phased out for employees who have modified adjusted gross incomes exceeding $170,820. The benefit is completely phased out for employees who have modified adjusted gross incomes of $210,820 or more.

Transportation fringe benefits. Employers may pay or reimburse employees a limited amount for their commuting expenses. For 2007, the monthly exclusion for qualified employer-provided parking is $215; the transit pass/commuter vehicle exclusion is $110. Reminder: These fringes may be offered on a pre-tax basis, but can't be part of a cafeteria plan.

Long-term care premiums. For tax and benefits purposes, employer-provided long-term care is treated like health benefits, with one big exception. While employers' payment of employees' health premiums is completely tax-free to employees, the amount employers can pay tax-free on long-term care insurance contracts is limited, based on employees' age. Reminder: These benefits can't be part of a cafeteria plan.

• For employees who are 40 years old or younger, employers can pay up to $290.

• For employees who are between 40 and 50 years old, employers can pay up to $550.

• For employees who are between 50 and 60 years old, employers can pay up to $1,110.

• For employees who are between 60 and 70 years old, employers can pay up to $2,950.

• For employees who are older than 70, employers can pay up to $3,680.

Health savings accounts and high-deductible health plans. For 2007, these figures apply to HSAs and high-deductible health plans. Reminder: HSA amounts are figured on a monthly basis.

• Employees with self-only coverage under high-deductible health plans can contribute the lesser of the annual deductible or $2,850. The minimum annual deductible for a high-deductible health plan is not less than $1,100. Annual maximum out-of-pocket expenses (deductibles, co-payments, etc.) can't exceed $5,500.

• Employees with family coverage under high-deductible health plans can contribute the lesser of the annual deductible or $5,650. The minimum annual deductible for a high-deductible health plan is not less than $2,200. Annual maximum out-of-pocket expenses (deductibles, co-payments, etc.) don't exceed $11,000.

To read all of the IRS's 2007 inflation-adjusted figures, point your browser to:

401(k) plans have long been able to use automated phone systems, e-mail, and the Internet to provide required notices and allow employees to make elections and consent to distributions. Final regulations now give plans the option of conforming to the Electronic Signatures in Global and National Commerce Act, otherwise known as the E-SIGN Act, or sticking to their current electronic systems. The regs also expand the plans that may communicate electronically, to include health plans and health savings accounts, cafeteria plans, educational assistance plans, and plans that provide qualified transportation fringe benefits. The regs are effective for notices provided to employees on or after January 1, 2007.

All Mandatory Notices May Be Provided Electronically

401(k) plans must provide employees with a host of notices. These include notices related to plan loans; notices safe harbor 401(k) plans must provide; eligible rollover notices; cash-out notices; notices of 10% withholding on lump-sum distributions; notices of plan amendments that provide for a significant reduction in the rate of future benefit accruals or that eliminate or significantly reduce an early retirement benefit or retirement-type subsidy; and spousal consent to waive the qualified joint and survivor annuity rule.

The regs allow those so-called mandatory notices to be provided to employees who consent to receive them electronically under either the E-SIGN Act or the plan's current electronic delivery system. The regs state that the electronic standards will also serve as a safe harbor for plans, including non-pension plans, that use electronic systems to deliver non-mandatory notices or employee elections. So, for example, employees may make beneficiary designations electronically under a system that conforms to these regs or a system that complies with previously issued standards. Important: The regs specify that COBRA notices, notices relating to a suspension of benefits when a former employee returns to work, summary plan descriptions, and summary annual reports may not be provided electronically.

E-SIGN Standards For Employees' Consent

Whatever electronic system is chosen, the regs don't change the timing or content of any notice. Accordingly, electronic systems must ensure that the content of notices is as understandable as written notices. In addition, systems must be designed to alert employees to a notice's significance at the time the notice is sent. Finally, electronic systems must keep records and be able to reproduce a notice for later reference.

The E-SIGN standards require that employees' consent to receive e-notices be made in a manner that reasonably demonstrates their ability to access the information electronically. If plans opt for e-mail, for example, employees must consent via e-mail. If employees consent on paper, plans must follow up to ensure that employees can use the electronic system.

Prior to consenting to e-notices, employees must receive a disclosure statement that outlines the following information:

• the scope of their consent (i.e., whether it's limited to one transaction or ongoing);

• their right to withdraw consent and receive paper notices, and whether they'll be charged a fee for their copies;

• the hardware and software needed for using the electronic system; and

• the procedure for updating personal information.

Non-E-SIGN Standards

Plans may decide to maintain their current electronic systems, the standards for which were established in 2000. More importantly, the regs stress that employees' elections to participate in a plan aren't covered by the E-SIGN Act. Upshot: Electronic systems must conform to the 2000 standards. Reminder: For plans that want to keep their current systems, or for plans (primarily non-pension plans) that want to allow electronic elections, employees must have the effective ability to access the system; the system must be reasonably designed to prevent impersonations; employees must be allowed to review their selections in order to confirm, modify, or rescind the terms before their elections become final; and the e-consent terms must be confirmed to employees. Employees must be allowed to request free paper copies of notices.

In two recently released Field Assistance Bulletins, the Employee Benefits Security Administration (EBSA) has concluded that, provided employers' participation with health savings accounts (HSAs) is minimal, HSAs won't be covered under Title I of ERISA as an employee welfare benefits plan. The EBSA has thus removed a critical impediment to employers that had been leery of offering HSAs to employees.

Employer Contributions Count, But So Do Other Factors

HSAs, which are paired with high-deductible health plans, are the newest health care option on the block. Essentially, HSAs are savings investment accounts, which are administered by third parties. HSAs are portable. Employees can make pre-tax contributions into HSAs. Similar to flexible spending accounts (FSAs), distributions allow employees to pay for out-of-pocket medical expenses on a tax-free basis. Unlike FSAs, there are no use-it-or-lose-it rules, so employees can accumulate funds almost indefinitely. To ramp up employee participation, employers often contribute into employees' HSAs.

The EBSA noted that while employer contributions are usually an important factor in determining whether a benefit is an employee welfare benefit covered under Title I of ERISA, it said that employer contributions aren't the only factor. More important, the EBSA said, is that HSAs are personal health care savings vehicles, not a form of group health insurance. The EBSA did stress, however, that the high-deductible health plan used for HSAs is probably covered under ERISA as an employee welfare benefits plan.

According to the EBSA, provided the establishment of HSAs is completely voluntary on employees' part, HSAs won't be subject to Title I of ERISA as welfare benefits plans. In this context, the EBSA said, completely voluntary can include situations where employers unilaterally open HSAs for employees and deposit funds into them. On the other hand, the EBSA said that employers must refrain from taking any of these steps.

• Employers can't limit employees' ability to move their accounts to other HSAs.

• Employers can't impose conditions on how employees use their HSA funds, or influence employees' investment decisions.

• Employers can't represent to employees that HSAs are part of an ERISA-covered employee welfare benefits plan.

• Employers can't receive any payment, compensation, or discount on another product from the HSA administrator.

What Employer Activities Are Minimal

The EBSA also delineated the activities that would qualify as minimal, so that employers performing any or all of them wouldn't risk bringing the HSAs into ERISA's orbit.

• Employers may impose terms and conditions that are needed to satisfy requirements imposed by other federal laws, primarily the federal tax code.

• Employers may forward employees' contributions through their payroll systems to a single HSA administrator that offers a limited selection of investment options, or investment options that replicate the employer's 401(k) plan. Catch: Employees must be afforded a reasonable choice of investment options.

• Employers may permit a single HSA administrator to advertise its products to employees.

Prohibited Transaction Exemptions

The EBSA also addressed certain issues regarding the prohibited transaction rules. Employers must promptly forward employees' HSA contributions to the HSA administrator, or else risk the IRS imposing a tax that begins at 15% on the amounts not promptly forwarded, and winds up at 100% of the amounts not promptly forwarded.

HSA administrators may offer cash incentives for establishing HSAs without running afoul of the prohibited transaction rules, but only if the cash is deposited into employees' accounts.

To read the two Field Assistance Bulletins, surf to:

http://www.dol.gov/ebsa/regs/fab_2004-1.html and http://www.dol.gov/ebsa/regs/fab_2006-2.html

Q. One of our employees is a foster parent. She and her husband have decided to adopt their foster child. A couple of issues under the Family and Medical Leave Act (FMLA) have arisen. First, which placement date — the date the child was originally placed in foster care or the adoption date — qualifies for FMLA leave, or do both placement dates qualify for FMLA leave as separate events? Second, the couple would like to take the child on a vacation to introduce him to his new extended family. Does that qualify as FMLA leave?

A. The answer to your second question is the easy part — no, the FMLA doesn't require that employers grant leave to employees who want to introduce their newly adopted child to his extended family.

As for the first question, FMLA regulations cover the timing of leave when an employee adopts or fosters a child. Under Reg. 825.200(a), employees can take up to 12 workweeks of leave in any 12-month period to care for a newly placed child. Here, the child was newly placed at the time of the foster care placement, not the later adoption. Therefore, the placement for foster care is the FMLA-qualifying event.

To read Reg. 825.200(a), surf to:

http://edocket.access.gpo.gov/cfr_2006/julqtr/pdf/29cfr825.200.pdf