Higher Pre-Tax Deductions for Commuting and Parking

Effective Jan. 1, 2007, the federal government increased the limits of its qualified transportation fringe benefit program, a tax incentive that can help employees save on their commuting costs and help companies save on payroll taxes. Since 1993, employers have been able to offer employees a tax-free benefit for commuting by transit and eligible vanpools or to pay for commuter parking under IRS tax code section 132(f). Tax-free commuter benefits can be structured as an employee-funded pre-tax payroll deduction or as an employer-funded benefit, or the costs can be shared by employer and employee. The benefit can be delivered in the form of transit provider-specific passes, universally accepted vouchers and terminal-restricted debit cards, or through a reimbursement model under specific conditions defined by the IRS. For 2007, the IRS announced an increase to $110 per month, tax-free, for transit benefits and $215 per month, tax-free, for parking benefits.

House Votes to Raise Federal Minimum Wage to $7.25

A $2.10 increase to the federal minimum wage received overwhelming approval from the House of Representatives on Jan. 10. The lopsided 315-116 vote in favor of the first raise to the minimum wage in 10 years surprised some political analysts who had predicted that the measure would pass by a narrower margin. The legislation would raise the wage rate from $5.15 per hour to $7.25 in three phases over 25 months. Democrats, who now control the House for the first time since 1994, held true to their pledge of passing a minimum wage bill during the first 100 hours of the 110th Congress. Republicans claim that tax breaks for smaller businesses are needed in the bill to help offset the financial burdens of any wage increase. In December, President Bush announced that he would support an increase to the minimum wage, but only if it included tax breaks and incentives for smaller businesses—much like the ones the Senate is set to consider later in January.

401k Statements Come With Advice by USA Today

A provision of the new pension law requires that, starting in 2007, traditional 401(k) account statements include advice about the need to diversify your portfolio and avoid loading up on your company's stock. Employers and financial providers also have to send 401(k) statements to employees every quarter, rather than annually, as some companies had done. The new rules fuel a trend toward providing investment advice for 401(k) plans. The pension law also has made it simpler for companies to automatically enroll workers in 401(k)s and to offer them guidance about where to invest. The changes come as more employers are shifting to 401(k) plans and thrusting the responsibility of retirement saving onto workers. The new statements provide investment guidance to employees in the hopes that employees will take a more active role in managing their retirement savings.

For more information about the Pension Protection Act of 2006 click here to be redirected to the IRS webpage.

IRS publishes 2007 mileage reimbursement rates

The Internal Revenue Service has established the standard mileage rates for 2007.

For business purposes, the rate will be 48.5 cents per mile, while for medical and moving purposes it will be 20 cents per mile. The new standards replace 2006 rates of 44.5 cents for business purposes and 18 cents for medical and moving. The IRS attributed the higher rates for 2007 in large part to higher prices for vehicles and fuel. The standard mileage rates for business and for medical and moving purposes are based on an annual study of the fixed and variable costs of operating an automobile, the IRS says.

Employees Cannot Prospectively Release an Employer For Injuries Caused by Employer’s Negligence

An exculpatory agreement prospectively releasing an employer from liability for injuries to an employee caused by the employer’s negligence violated Connecticut public policy, according to the Connecticut Supreme Court. Employees cannot assume full responsibility for any risk of injury and agree not to hold the employer liable. Employer’s are always responsible for injuries and illnesses resulting from their negligence.