Cafeteria Plans

Overview
What are Cafeteria Plans?  How do they work?
http://www.irs.gov/pub/irs-utl/introductiontocafeteriaplans10-02.pdf
http://www.ecfc.org (The Employers Council on Flexible Compensation site)

Q&As

http://www.irs.gov/faqs/page/0,,id=83301,00.html#top
http://www.benefitslink.com/modperl/qa.cgi?db=qa_125

 Mid-Year Election Changes

When are participants allowed to change their contributions during the Plan Year?
http://www.irs.gov/pub/irs-utl/introductiontocafeteriaplans10-02.pdf  pp. 5-9

COBRA and FSAs

Application of COBRA is limited for most health flexible spending arrangements.
http://www.irs.gov/pub/irs-utl/tres_reg-54-4980b.pdf

FMLA and Cafeteria Plans

How does the Family and Medical Leave Act apply to Cafeteria Plans?
http://www.irs.gov/pub/irs-utl/tres_reg-1125-3.pdf

Assumed Participation in Cafeteria plans.

Cafeteria plans may use an automatic enrollment process whereby the employee’s salary is reduced each year to pay for a portion of the group health coverage under the plan unless the employee affirmatively elects cash. In addition, employers may treat all participants as being in the cafeteria plan for section 415 purposes even though the plan mandates salary reduction and coverage for uninsured participants.  http://www.irs.gov/pub/irs-irbs/irb02-20.pdf Rev. Rul. 2002–27, page 925

Cafeteria plans after merger / acquisition.

In an asset sale, transferred employees who have elected to participate in health flexible spending arrangements (FSAs) under the seller’s cafeteria plan may continue to

exclude salary reduction amounts and medical reimbursements from gross income without interruption at the same level of coverage after becoming employees of the buyer.

http://www.irs.gov/pub/irs-irbs/irb02-23.pdf Rev. Rul. 2002–32, page 1069.

Health Reimbursement Accounts and Section 125

This notice describes the tax treatment of an employer provided medical care expense reimbursement plan called a health reimbursement arrangement (HRA).  This notice also explains that the requirements for flexible spending arrangements (FSAs) stated in section 125 of the Code are generally not applicable to HRAs. In particular, an HRA may allow a plan participant to carry forward unused reimbursement amounts to be used for medical care expense reimbursements in later coverage periods. Also, this notice explains that to retain exemption from the section 125 FSA requirements, the HRA must be solely employer-funded and cannot be directly or indirectly paid for pursuant to salary reduction election.

http://www.irs.gov/pub/irs-irbs/irb02-28.pdf  Notice 2002–45, page 93.

Over the Counter Drugs and Self-insured medical reimbursement plans.

Employer reimbursements of amounts paid by an employee to purchase nonprescription medicines and drugs are excludable from gross income under section 105(b) of the Code. However, amounts paid by an employee for dietary supplements that are merely beneficial to the general health of the employee or the employee's spouse or dependents are not reimbursable or excludable from gross income under section 105(b). http://www.irs.gov/irb/2003-38_IRB/ar08.html  Rev. Rul. 2003–102, page 559.  http://www.irs.gov/newsroom/article/0,,id=112623,00.html

Use of Debit Cards in Health FSAs

Employer-provided expense reimbursements made through debit or credit cards and other electronic media are excludable from gross income under § 105(b), in certain cases.

http://www.irs.gov/pub/irs-drop/rr-03-43.pdf

Domestic Partners and Cafeteria Plans

How may Domestic Partners benefit under Cafeteria Plans?  When are benefits for domestic partners taxable to employee?

http://www.irs.gov/pub/irs-utl/tres_reg-54-4980b.pdf   Questions 65-66 pp. 8-9