Question

What are some types of fringe benefits covered by Sec. 132? What is the tax benefit of such fringe benefits? What happens if the plan is discriminatory?

Answer 1

1.

Some types of fringe benefits covered by Sec. 132 are :

* No-additional-cost service - Service provided to an employee for use by such employee

* Qualified employee discount - Any employee discount for qualified property or services

* Working condition fringe - Any property or services provided to an employee and if the employee paid for such property or services, such payment would be allowable as a deduction under section 162 or 167

* De minimis fringe - Any property or service the value of which is so small, accounting for which is unreasonable or administratively impracticable

* Qualified transportation fringe - Transit pass, Transportation in a commuter highway vehicle, Qualified parking, Any qualified bicycle commuting reimbursement.

* Qualified moving expense reimbursement - Any amount received by an individual from an employer as a payment for expenses which would be deductible as moving expenses under section 217 if directly paid or incurred by the individual.

* Qualified retirement planning services - Any retirement planning advice or information provided to an employee and his spouse by an employer maintaining a qualified employer plan

* Qualified military base realignment and closure fringe - 1 or more payments under the authority of section 1013 of the Demonstration Cities and Metropolitan Development Act of 1966

Working condition, qualified transportation and parking, and de minimis benefits must be offered only to employees. Educational assistance can be offered to employees and former employees. The remaining benefits may be offered to employees, spouses, dependents,and retirees

2.

If the requirements of Sec. 132 are met, employees are not required to include the value of the benefits in gross income.

3.

Discrimination is prohibited relative to most Sec. 132 benefits. Discrimination is permitted relative to working condition benefits, parking and transportation and de minimis benefits other than eating facilities.

Employees who receive prohibited discriminatory benefits must include them in Gross Income. The exception is discriminatory right to use recreation and athletic facilities. In the case of such discrimination, the employer cannot deduct the related expense.