Opt-Out Cash Option Payment from Cafeteria Plan: Fringe Benefit?

[spmcqui]

Hi All,

Fringe benefits are excluded as eligible compensation for my client, and they are currently having deferrals being taken on $200 monthly payments to employees who have opted out of the Company's health insurance (Cafeteria Plan). Note, to do this, they have to show proof they are in they have health insurance elsewhere.

I've done some research, and what I've come up with so far is that these cash out option payments are taxable income and in box 1 of employees W-2's and that a Cafeteria Plan is considered a fringe benefit.

Does anyone have an excerpt that I can show the client where these cash payments for opting out are considered to be a fringe benefit that is within the employees total compensation?

IRS guidance is 4.23.5.13 and 4.23.5.13 15-B. I've cruised through all of the internet, including this forum, and cannot for the life of me find a definitive answer.

Please let me know what additional information would be needed.