Business being sold - what options for cafeteria plan?

[Belgarath]

Does this follow the same rules as qualified plans, or is there a whole separate regulatory scheme?

[Luke Bailey]

Belgarath, you're talking asset sale, right? Otherwise there wouldn't be an issue.

As far as I know, the IRS had not published any guidance. In most of the deals I've done for the last 15 or so years the buyer was comfortable with giving the seller's employees credits in its own cafeteria plan equal to what they had remaining in the seller's plan as long as the seller transferred the cash. I could provide an explanation of why that should be OK from a tax standpoint, but it's pretty common.

[Belgarath]

Thanks Luke. I thought I had deleted this post, but apparently I was unsuccessful!

[Luke Bailey]

10 hours ago, Belgarath said:

Thanks Luke. I thought I had deleted this post, but apparently I was unsuccessful!

Belgarath, one version was deleted, this was up. Why did you want to delete?

[Belgarath]

'Cause I found a pretty good discussion of the issue in EBIA. In addition to general discussion, reference to RR 2002-32 re Health FSA's. The information was sufficient for my purposes, so I didn't want people to waste their time.  Thanks for asking.

[Brian Gilmore]

I've posted some materials addressing also in case it helps:

• https://www.newfront.com/blog/merger-acquisition-rules-health-fsa-2

• 2022 Newfront M&A for H&W Employee Benefits Guide

[Luke Bailey]

Had forgotten the Rev. Rul. Thanks, Brian.

[Belgarath]

Thanks Brian. Good stuff!