Subchapter S - 2% Shareholder participation: Cafeteria Plan -vs- POP

[Guest BeneGal]

According to the EBIA (Employee Benefits Institute of America) "A more than 2% shareholder in a Subchapter S corporation cannot participate in a cafeteria plan." This rule applies to Premium Only Plans as well... correct?

I have a new group who had a previous administrator that said it wasn't the case for a POP because it's not a Cafeteria Plan. I say, same rule applies - but it would be nice to get some confirmation!

[Guest JimD-EBR]

Same rules apply...Section 125(d) defines a cafeteria plan in part as a plan where the participants may choose among 2 or more benefits consisting of cash and qualified benefits. In the case of a POP, one benefit is cash (taking their compensation as taxable cash) and another benenfit being say health insurance.

[GBurns]

It really is not that the same rules apply, it is that a POP plan is a cafeteria plan. There is no difference between the cafeteria plan referenced by EBIA and a POP.

POP is premium only as opposed to additional choices such as FSA etc.

A car with fabric seats and stick shift is not any less of a car than one with leather seats, automatic, power steering etc etc.

If an adminstrator thinks that a POP is not a section 125 cafeteria plan, I shudder to think of what they might be doing with their plans.

As in all cases when someone tells you something like that let them give you cites to support their position. My cites are the IRC, Treas Regs, Proposed Treas Regs, the EBIA Manual and a simple Google search on "POP cafeteria plan".