Financial counseling services to spouse of deceased or terminally iII employee are income.

• Author: Coplan, Bob

In Letter Ruling 9929043, the Service held that personal financial services provided by an employer to a deceased or terminally ill employee's spouse or other legal dependent are includible in income, while, apparently, the same services provided to a terminally ill employee are excludible. Under present law, there is no specific exclusion for employer-provided retirement planning services; however, such services may be excludible as employer-provided educational assistance or as a fringe benefit.

Under the facts of the ruling, the company intends to adopt a plan to provide personal financial counseling services to survivors of deceased employees and to survivors of eligible employees diagnosed with a terminal illness. Eligible employees include both full- and part-time employees who have been employed by the company for more than three months. "Survivor(s)" of an eligible employee include the deceased or terminally ill employee's spouse and legal dependents (as defined under Sec. 152) and other appropriate, persons as determined by the company.

Under the plan, the following services will be provided at no cost to the survivor(s): On an eligible employee's death or diagnosis with a terminal illness, the employee's survivor(s) will be entitled to a meeting with a company financial planner for the purpose of assisting the survivor(s) in planning his financial affairs. The meeting will cover benefit election forms; tax aspects of benefit plan distributions; application for employer and government benefits; budgeting and cashflow; understanding the estate settlement process; life insurance proceeds investment and other beneficiary distributions; and estate tax planning. The financial planner will prepare a financial plan and a long-term cashflow analysis. Following a one-on-one review of the plan with the financial planner, the survivor(s) will receive proactive periodic contact to offer additional support and guidance. Survivor(s) will also be entitled to access the company's financial counseling hotline. In addition, written materials will be provided on personal financial planning.

Under present law, certain employer-provided fringe benefits are excludible from gross income and wages for employment tax purposes. These excludible fringe benefits include working-condition...