401(k) Election Changes

[luissaha]

Cafeteria plan document contains language providing that a participant may modify or revoke an election under a 401(k) plan as allowed under Treas. Reg. section 1.125-4(h).  The 401(k) plan document, however, provides for an "irrevocable" election to transfer amounts from the cafeteria plan to the 401(k) plan.  As such, we seem to have conflicting language  in the plans.  My inclination is that the 401(k) plan should be amended to allow for changes to deferrals for the cafeteria plan mid-year.  Is there any reason why we should not allow for these mid-year changes?  Don't most cafeteria plans allow for mid-year changes to 401(k) elective deferral amounts?

[Sandra Pearce]

While allowable to have a qualified 401k Plan as a benefit in a Section 125 Cafeteria Plan it is not required.  We have our 125 plan and our 401k plans separate; i.e., separate plan documents, separate tax filings, etc.  It would seem having the 401k as a benefit under your 125 plan is limiting.

[hr for me]

agree that you need to amend you 401k plan to allow for mid-year changes that are allowed by that section (h) if that is what the employer wishes to actually have happen.  Generally most 401k plans as far as  I have seen, even back to the old balance forward plans, allow for mid-year changes at least quarterly (and sometimes on the daily plans much more often than that)

[luissaha]

Thank you for your responses.  Very helpful!