QUESTION: We know that the IRS issued proposed cafeteria plan regulations in 2007. What is the status of these regulations? Are employers required to comply with them?
ANSWER: The IRS has yet to publish final cafeteria plan regulations. Meanwhile, the 2007 proposed regulations can be relied on for guidance until the final regulations are issued, as explained in the preamble. (See our Checkpoint article about the proposed regulations.) Keep in mind that many provisions of the 2007 proposed regulations merely incorporate prior guidance; thus, as a general matter, employers and administrators will want to conform plan design and operations to the proposed regulations’ requirements. The proposed regulations address various cafeteria plan issues, including general rules, elections, flexible spending arrangements (FSAs), substantiation of expenses, and nondiscrimination rules.
For more information, see EBIA’s Cafeteria Plans manual, which provides detailed coverage and analysis of the 2007 proposed regulations, as well as other regulations, laws, and agency guidance regarding cafeteria plans, health FSAs, and DCAPs.
Contributing Editors: EBIA Staff.