Governmental Agency and Cafeteria Plan

[Guest Robert Lees]

Can a governement agency have a cafeteria plan? If so, what are the reporting requirements? 5500?, etc.?

[Joe Priselac]

A governmental instrumentality can adopt a Cafeteria Plan just like any private sector employer. Because Section 125 plans are Statutory Fringe benefits, the Internal Revenue Code requires a plan document and annual filings of the 5500 form, governmental agencies have to comply even though they are exempt from ERISA compliance.

[Dave Baker]

Strange but true, ain't it?

Statutory authority is section 6039D of the Internal Revenue Code. The instructions to IRS Form 5500 also make this clear.

I guess the government is trying to keep stats on how much money flows through these pre-tax programs, so it wouldn't matter whether the employee is employed by a governmental entity or not. You wonder how many governmental employers are out of compliance.