Section 125 Cafeteria Plans: Making Sense of the IRS Rules

Lorman Education Services

Make sure your cafeteria plans are set up correctly and things are done right the first time.

A Section 125 Cafeteria Plan is not just for large employers. Even the smallest employers have them and we all know that they come with rules that must be followed.

Do you really know what those rules are? We will walk through the rules that Congress and the IRS have given us. What benefits can, or cannot, be offered through a cafeteria plan? What are the IRS rules about making and changing employee elections? What does the IRS expect you to have in the way of a plan document? How do the nondiscrimination rules affect what you can do in your cafeteria plan?

The consequences of getting it wrong can be severe and there are some mistakes that cannot be fixed. So, it is important to make sure that plans are set up correctly and that things are done right the first time. We will review all of that and more.

Learning Objectives:

• You will be able to define what a Section 125 Cafeteria Plan is.
• You will be able to describe the benefits that can, or cannot, be offered on a pre-tax basis through a cafeteria plan.
• You will be able to explain the tax advantages to both employers and their employees of offering a cafeteria plan.
• You will be able to recognize when participant elections can, or cannot, be changed.

Faculty: Steven P. Smith, Hinkle Law Firm LLC

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