Initial Election Period?

[chris]

Cafeteria plan will be effective January 1, 2000. All employees employed as of that date will be eligible to participate. Election period is 30 days after entry date, i.e., January 1. Employees are paid semi-monthly. Assuming that all employees made their elections and returned them to the employer on January 2, would the elections be effective as to the payroll period beginning January 15 or February 1?

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[JWK]

As you may know, since you're asking this question, in an ideal world, those elections would have been made before January 1,2000. According to Treas. Reg. 1.125-1, A-15, elections should be made before the first day of the plan year. If (as appears from your question) this is the first year of the plan, I'd be tempted to have a short first plan year, running from 2/1/00 to 12/31/00, and have the contributions for January coverage made on an after-tax basis.

(Don't know if this is practical--I'd be interested in hearing comments from others on this.)

If the above solution doesn't work, I'd be more comfortable implementing the elections on 2/1, because it's after the last day of the initial enrollment period. So the January contributions would still be after-tax, but I guess you'd use a 1/1/ to 12/31 plan year on your 5500.

[This message has been edited by JWK (edited 12-23-1999).]