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Follow new recipe for cafeteria plans

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in Employee Benefits Program,Hiring,Human Resources,Leaders & Managers,Management Training

The IRS has issued a long string of regulations and rulings on “cafeteria plans” over the past 20 years. Even expert tax practitioners have trouble keeping up with all the stops and starts. But a new comprehensive set of proposed regulations look like the real deal. (NPRM REG-142696-05)

Strategy: Amend an existing plan to comply with the new regs. For most companies, the updates will be minor. If you adopt a cafeteria plan for the first time in 2008, use these new regulations as a guideline.

The new proposed regulations are mandatory for plan years beginning after 2008, but the IRS says you can rely on them now. That’s a good indication that they’re here to stay.

Here’s the whole story: Under a cafeteria plan authorized by Section125 of the tax code, you can provide employees with a “menu” of tax-free fringe benefits to choose from in lieu of cash compensation. Benefits that are exempt from tax under a specific c...(register to read more)

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