Cafeteria plan and S Corporation owner... eligibility questions

[Guest Magilla91]

My husband is a co-owner of an S corporation. I have recently been hired as an employee to establish a cafeteria plan for use by the company's employees. I understand that as a more than 5% sharehold my husband is ineligible to participate in the plan.

However, can I, his spouse participate or am I too exempt because I am his spouse? I am not a share holder. I have received different info from different sources on this and the IRS has been of no help to me as of yet.

Thank you for any insight.

[SLuskin]

You cannot participate in the Cafeteria plan, either. Section 318 of the Internal Revenue Code deals with stock attribution. That means that shares of one person's stock are "attributed" to that person's spouse, parents, children and grandchildren. So, even though you do not own the stock, you are treated for Cafeteria Plan purposes as though you do.

[papogi]

Spouses and dependents of employees who are any of the following: an officer, a 5% owner, or an HCE are also not eligible.

[Guest Magilla91]

Wow! That was amazingly fast. You don't know how many places I've looked in an attempt to find out the answer to my question. Thank you so much!