Confused: Pre-tax deduction for co-pay but no cafeteria plan

[sloble@crowleyfleck.com]

Can an employer have an arrangement whereby employees pay for their co-pay (not premiums) on a pre-tax salary reduction basis without a cafeteria plan (health FSA) or HRA or MSA? I heard of someone doing this this and I can't find the authority for it.

[Guest JerseyGirl]

Without meeting certain Section 125 requirements, including a formal plan document, an employer can not offer a pre-tax plan. If/when an audit takes place – for any employee participating in this non-plan plan, or of the employer – the improper status of this *set-up* (I’m reluctant to use the word *plan* for this) will come to light, and all participating employees will owe taxes on the benefits under the constructive receipt doctrine. There will be very unpleasant consequences for the employer as well– not the least of which will be lots of angry employees owing taxes!

[david rigby]

...the improper status of this *set-up* (I’m reluctant to use the word *plan* for this)...

Ah. A perfect case for using the British term: "scheme".

[sloble@crowleyfleck.com]

Thank you! This is all what I suspected.