IRS Puts Tax Rule on Hold After Firms Complain

Internal Revenue Service responded to business pressure Thursday and delayed for two months implementing a tax rule that encourages companies to provide health and life insurance benefits to all their workers.

The new deadline for implementing the so-called Section 89 rules is Dec. 1, the IRS said.

Legislation enacted in 1986 requires employers to demonstrate that health and accident plans and group life insurance do not favor higher-paid workers. The original deadline of Jan. 1, 1989, had been delayed until Oct. 1.

Has Opposite Effect

Business groups have lobbied to have the rule dropped altogether, arguing that it is so complex, costly and time consuming that it will drive some small companies out of business.

They claim the rule is having the opposite effect intended and that companies are dropping benefits rather than extend them to all workers.

Several measures affecting Section 89 are pending in Congress. One, which has passed both the House and Senate but must be reconciled before going to President Bush, would delay implementation until Oct. 1, 1990.

A second bill, passed by the House Ways and Means Committee and the full Senate, would revamp but not rescind the rules and postpone the effective date until Jan. 1.