Evergreen elections in 125 plans

[Guest HRlawguy]

Have there been any recent developments or pronouncements on the ability of a plan to permit "evergreen" elections (those that roll over automatically unless the participant affirmatively submits a new election form) in cafeteria plans?

It was my understanding that official pronouncements neither authorized nor prohibited such elections, but that informal statements by IRS personnel had suggested that they are permitted so long as the plan document authorizes such elections and the participants are clearly notified of this feature of the plan. (It would also seem that good practice would dictate that a new enrollment form be distributed each year, with a reminder about the evergreen feature.)

A colleague indicated that he had heard that the IRS recently came down on the side of mandatory annual elections, but no details were given about how, when, or where.

[Kirk Maldonado]

They were approved in Rev. Rul. 2002-27.

[GBurns]

Regardless of what the IRS says you should still pay close attention to your applicable state laws regarding the issue of salary deductions and reductions.

[Kirk Maldonado]

GBurns:

That assumes that those state laws are not preempted. I believe that they are, although I will readily concede that not everybody shares my opinion.