Cafeteria plan testing- IRS audits?

[Flyboyjohn]

Anybody have experience with an IRS audit of a cafeteria plan for compliance with section 125 non-discrimination testing?

Doesn't seem to be something IRS has much interest in.

Thanks

[Luke Bailey]

The issue comes up for me far more often in M&A transactions, where acquirer will question compliance.

[Larry Starr]

Unless things have changed drastically from when I developed the cafeteria plan training material for ASPPA, there is no one at IRS who has responsibility for these audits.  The only time they seem to happen is when a major company (like, I believe, J.C. Penny) gets audited and then they have specialty auditors who look at everything.  I think it was Penny that got in trouble years ago for having an employee pre-tax health insurance (which would be a cafe plan) but never actually adopted the plan. Cost them a fortune as I remember.

Luke is right: where you see this as an issue is in the due diligence involved in M&A work more than anywhere else.