Notices
The Internal Revenue Service provides guidance in Notice 2005-5 relating to automatic rollover provisions for qualified retirement plans under §401(a)(31)(B). The Economic Growth and Tax Relief Reconciliation Act of 2001 modified §401(a)(31)(B) to require that mandatory distributions of more than $1,000 from a §401(a) qualified plan be paid in a direct rollover to an individual retirement plan unless the distributee makes an affirmative election to have the amount rolled over into an eligible retirement plan or to receive the distribution directly. Notice 2005-5 becomes effective March 28, 2005.

In Notice 2004-83, the Service updated the list of designated private delivery services for purposes of timely mailing treated as timely filing/payment under §7502. The list follows:

• DHL Express (DHL): DHL Same Day Service; DHL Next Day 10:30 am; DHL Next Day 12:00 pm; DHL Next Day 3:00 pm; and DHL Second Day Service

• Federal Express (FedEx): FedEx Priority Overnight; FedEx Standard Overnight; FedEx 2 Day; FedEx International Priority; and FedEx International First

• United Parcel Service (UPS): UPS Next Day Air; UPS Next Day Air Saver; UPS 2nd Day Air; UPS 2nd Day Air AM; UPS Worldwide Plus; and UPS Worldwide Express.

DHL, FedEx, and UPS are not designated with respect to any type of delivery service not identified above. The list of designated private delivery services is effective January 1, 2005, and will remain in effect until further notice.

Revenue Procedure
In Rev. Proc. 2005-11, IRS provides generally applicable standards for determining whether services performed by students of certain public or private nonprofit schools, colleges, or universities described in §509(a)(3) qualify for the §3121(b)(10) exception from FICA tax. The Rev. Proc. also modifies safe harbor standards.

Final Regulations
In TD 9167, IRS provides guidance on whether an employer is considered a "school, college, or university," and whether an employee is considered a "student" for purposes of exemption from the FICA and FUTA taxes. The final regulation is applicable for services performed on or after April 1, 2005.

In TD 9170, the Service provides temporary and final regulations concerning the applicability of §1374 to S corps that acquire assets in carryover basis transactions from C corps on or after December 27, 1994, and to certain corporations that terminate S corp status and later re-elect to become S corps. The regulations became effective December 22, 2004.

In TD 9166, the Department of Treasury (IRS), the Department of Labor (Employee Benefits Security Administration), and the Department of Health and Human Services (Centers for Medicare & Medicaid Services) provide guidance on the HIPAA portability requirements for group health plans, including the restrictions on the extent to which plans can impose preexisting condition exclusions, the furnishing of certificates of creditable coverage, the provision of special enrollment rights, etc. The final regs are effective February 28, 2005, and apply for plan years beginning on or after July 1, 2005.

The Service expands time for election of alternate estate valuation date in TD 9172. The final regs affect estates that are required to file Form 706 and went into effect on January 4, 2005.

Proposed Regulation
In REG-152945-04, IRS issues proposed regs that describe the rules that apply in determining the amount of income tax withholding on supplemental wages (e.g., bonuses). Generally, employers are permitted under certain circumstances to withhold income tax based on a flat percentage rate (currently 25%) without reference to an employee's Form W-4. The proposed regs. also describe the mandatory income tax withholding at the highest income tax rate (35% currently) that applies to supplemental wages in excess of $1,000,000 in any calendar year.