Partners participating in Cafeteria Plan-Solutions for Plan Correction?

[Floridaattorney]

Client's partners are mistakenly participating in cafeteria plan (. What is best solution to wrongful participation?

A. Stop accepting partner contributions asap but let them utilize benefits until they hit their $2500 limits.

B. Stop accepting partner contributions asap and return any unused funds.

C. Let them participate through the plan year end and do not let partners enroll in the future?

D. Terminate plan and start over with a new plan which will be administered so that partners can not participate

E. Some combination of the above or, an alternative solution

Any other issues or points?

Thanks.

[FlexGuy]

Because partners cannot participate in a cafeteria plan, I suggest they:

1. Stop subsequent partner contributions
2. Return and tax any unused partner contributions
3. Tax amounts that were reimbursed to partners under the Plan