Wife of Sole Prop.

[Guest Joe Vasko]

Is the wife of a sole prop. eligible to participate in a Section 125 Plan? She receives a W-2 each year.

Thanks, Joe

[Guest lschaab]

The wife of a sole-prop can participate in a Cafe Plan as long as they are considered a legitimate employee, and satisfy the same eligibility criteria as regular employees. Also, the wife cannot be considered 'self-employed' which equates co-ownership, partnership or joint owner. You should be careful on advising the wife to participate until you know all the answers to her relationship (including financially) to or with the company. The EBIA green book has a short discussion on this topic.

Also keep in mind that discrimination can be a problem if she is the only employee.