Nearly a quarter century after the Internal Revenue Service started releasing piecemeal proposed regulations on cafeteria plans, employers now have new, updated guidance on important topics such as nondiscrimination testing and debit card programs. They’re not final IRS regulations, mind you. But at least a new set of coordinated proposals is on tap to replace the old ones. They are expected to become final this year.
Rely on these rules now, although they don’t take effect until Jan. 1, 2009.
The new rules, which leave in place existing “change in status” rules, are designed to incorporate more than 20 years’ worth of legislative developments (notably concerning Health Savings Accounts, or HSAs) and prior rulings. More important, these proposals may indicate a new degree of scrutiny of cafeteria plans by the IRS.
The IRS proposals emphasize that cafeteria plans are the exclusive way fo...(register to read more)