Newsletter Vol. 1, No. 1 September 1997

TRA '97 includes a number of provisions on employee benefits in addition to those for qualified plans:

• The employer provided educational assistance exclusion of up to $5,250 was extended to expenses paid before June 1, 2000; it continues to be limited to undergraduate courses.
• The up to $170 per month exclusion for employer provided parking has been modified to permit employers to offer the equivalent in cash without loss of the exclusion for the parking itself; cash payments, if elected, are included in income.
• Several changes in IRAs were adopted. For deductible IRAs, the thresholds for the phase-out for indiviudals who are active participants in qualified plans has been increased, beginning in 1999. (The deduction limit continues to be $2,000.) New non-deductible IRAs with tax- free distributions (Roth IRAs) have been introduced, beginning after 1997, with a phase-out for single taxpayers with adjused gross income of $95,000 to $110,000 and married taxpayers with adjusted gross income of $150,000 to $160,000. Roth IRAs are available without regard to whether the contributior is an active participant in a qualified plan. The contribution limit is $2,000, taking into account deductible contributions. The active participant rule for deductible IRAs has been modified so that the spouse of an active participant is no longer disqualified merely because the spouse is an active participant, effective after 1997. This means that most homemakers will be able to make deductible contributuons up to $2,000. The 10% premature distribution penalty has been made inapplicable to distributions for certain higher education expenses of the taxpayer, spouse or a child or grandchild and for certain expenses incurred by first-home buyers (limited to $10,000), all effective after
  1997.
• Employers providing meals to employees on its premises that are excluded from employees' income under the "provided for the convenience of the employer" rule may be deducted by the employer, based on the operating costs of the facility, rather than being subject to the 50% limit, effective after 1997.
  

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