"Although Code Section 6039D requires employers to file annual returns for cafeteria plans, the IRS suspended that requirement in 2002. Nevertheless, the DOL's Form 5500 requirement continues to apply to many employee welfare benefit plans that are governed by ERISA. A cafeteria plan is merely a funding vehicle for its component benefit plans and is not itself an ERISA employee welfare benefit plan, but component plans that are ERISA plans (e.g., medical plans or health FSAs) must file Form 5500s unless exceptions apply." MORE >>
"Health FSAs must provide 'uniform coverage,' the Section 125 nondiscrimination rules require employers to provide a 'uniform election' with respect to contributions, and employers must implement cafeteria plan elections on a 'uniform interval'." MORE >>
"Rather than continuing to layer new offerings onto an outdated framework, a growing number of organizations are rethinking benefits at the foundational level and shifting toward a flexible 'build your own benefits' approach. This model gives employees a defined allowance or a set of options they can tailor to their individual priorities, whether that includes traditional healthcare, caregiver support, wellness benefits or less conventional offerings like pet insurance. This shift reflects a broader reset in total rewards strategy." MORE >>
"If enacted, the legislation [HR 8314] would allow employers to establish a 'Qualified Benefit Options Plan,' permitting current and former employees to direct their employer contributions to benefit programs that meet their specific needs. The contributions to eligible tax-favored employer-provided benefit programs would be allocated without triggering taxable income solely due to that choice. The available benefits would include: [1] Nonelective contributions to a retirement plan; [2] Health savings account or health reimbursement arrangement contributions; [3] Qualified educational assistance benefits (including student loan repayments); [4] 'Other benefits which are excluded from gross income' under the Internal Revenue Code." MORE >>
"With tax deadlines still fresh and enrollment activity behind you, now is the ideal time to address ongoing obligations that are often overlooked until they become urgent. This checklist highlights the key compliance areas benefits administrators should review early in Q2 to stay on track and avoid costly mistakes later in the year." MORE >>
"The tax exclusion under Section 125 is available only to employees as defined by the IRC. Put simply, if the [IRS] treats an individual as an owner rather than an employee, they are not eligible for pre-tax deductions under Section 125.... [I]ndividuals who are considered self-employed for tax purposes do not qualify as employees under this definition and cannot participate in a Section 125 plan on the same basis as W-2 employees." MORE >>
"PLR 202434006 permitted an election between a defined contribution plan, an HRA, an HSA, and student loan payments under a qualified educational assistance program. The [OPTIONS Act (HR 8314)] goes beyond that and allows an election for any benefits that are excluded under the Code. Presumably, this would include benefits such as a dependent care assistance program and a Trump Account." MORE >>
"Trump Accounts are a new form of traditional individual retirement account (IRA) that the 2025 reconciliation law (P.L. 119-21) created for the benefit of children. Savers will be able to contribute to Trump Accounts starting on July 4, 2026.... Anyone can contribute to a child's Trump Account, although individual contributions during the growth period are not tax-deductible for either the contributor or the beneficiary. Employers can contribute up to $2,500 (adjusted for inflation after 2027) tax-free to the Trump Accounts of employees or their dependents (amount is per employee, per year)." MORE >>
"To provide clarity and expand access to these flexible contribution options, the [Optimizing Participant Tax Incentives through Optional Noncash Selections -- or OPTIONS -- Act (HR 8314)] would amend Section 125 of the Internal Revenue Code to establish a 'qualified benefits option plan' allowing participants to elect to allocate employer contributions among qualified benefits. The legislation further stipulates, however, that participants may not elect to receive cash or any other taxable benefits instead of qualified benefits." MORE >>
"If your Employee Benefits Consultant advised you to not execute a plan document for your pre-tax Section 125 benefit plan because 'ERISA does not apply to municipalities', you likely facing at least two plan sponsor issues: [1] your Section 125 plan is likely in jeopardy, and [2] you are facing a potential fiduciary obligation to find a new Employee Benefits Consultant." MORE >>
"The proposed rules don’t address employer contribution programs, employer “matching” the Treasury’s contribution, employee salary deductions, investments or ERISA matching considerations ... What do employers need to know? IRS and Treasury are encouraging parents to set up Trump accounts for their children. Parents must actively elect to open an account. Accounts must be set up before an employer can make contributions or deposit salary deductions." MORE >>
"Under this designation, BNY will manage the initial accounts and help develop the new Trump Accounts app -- a secure, user-friendly platform that will enable families to easily access and manage their accounts. As part of this process, BNY has partnered with Robinhood, which will serve as brokerage and initial trustee for Trump Accounts. Together, these partners will support Treasury's goal of ensuring every eligible child can access a Trump Account quickly and easily." MORE >>
"This legal alert provides an overview of Trump accounts, employer contributions, trustee obligations, initial and rollover contributions, investments, and state tax implications.... Although the proposed regulations and the Notice provide valuable information for employers, the [DOL] has not yet confirmed that Trump accounts will be exempt from ERISA, similar to health savings accounts and payroll deduction IRAs." MORE >>
"The proposed regulations would apply to tax years beginning on or after January 1, 2026, with final rules expected in early 2027.... The IRS has expressly reserved further rules governing contribution administration, investments, distributions, reporting, and employer contribution programs. As a result, Trump accounts are authorized but not fully operational and stakeholders should expect additional regulatory detail before broader program implementation can proceed." MORE >>
"Employers interested in making contributions to Trump Accounts or facilitating employee contributions to Trump Accounts may wish to begin planning now to identify open questions as well as internal resources and assistance that may be needed from service providers, in particular if there is a desire to have a program in place under a cafeteria plan in time for open enrollment near the end of 2026." MORE >>
"Employers generally seek to include all ERISA welfare benefit plans under the umbrella of a single 'mega' wrap plan document and SPD. This approach facilitates multiple efficiencies and is generally considered the best practice method to streamline plan administrative burdens." MORE >>
"Building upon predecessor guidance in Notice 2025-68, the proposed rules provide clarity around account eligibility, who is authorized to establish a TA, and how the establishment process works -- information employers who plan to offer a Trump Account Contribution Program (TACP) will need to successfully draft eligibility guidelines and determine what to include in their benefit communications to employees." MORE >>
"While the [Notice 2025-68] and the Proposed Regulations provide important clarity on how Trump Accounts are opened ... several open questions still remain.... [1] Eligible investment; [2] Distributions during and after the Growth Period; [3] Reporting requirements for trustees and custodians ... [4] Nondiscrimination testing for Code Section 128 employer contribution programs; [5] Guidance exempting Trump Accounts from ERISA (similar to that of HSAs); [6] Coordination of salary reduction contributions with Code Section 125 rules." MORE >>
"Often discovered during an audit or transaction, the failure to maintain a written plan document can expose employers to unexpected tax penalties.... A common misconception is that payroll practices or other enrollment materials can substitute for a written plan, however, SPDs, benefit summaries, or other insurance carrier certificates do not replace a Section 125 plan document. " MORE >>
"A [recent poll] found that close to 16% of respondents plan to offer Trump Account funding options, whether that's through pre-tax employee contributions or direct employer contributions, or are actively considering doing so. Yet, over half said they do not expect to 'take any action' with Trump Accounts, and 30% report feeling undecided." MORE >>
"The promise of giving kids 'free money' surely piqued the interest of children and parents alike. Employers, however, are not all rushing to incorporate Accounts into the suite of benefits offered to employees.... [T]he vast majority are waiting on more guidance to determine how the Accounts will operate in conjunction with existing benefits offered to employees." MORE >>
"One of the requirements under Section 128 of the Code for a valid employer-provided Trump account contribution is that the employer adopt a 'separate written plan.' Although additional guidance may be needed before finalizing a separate written plan document, in light of commentary in the Notice concerning the anticipated requirements of a Trump account contribution program, Section 129 dependent care assistance program plan documents may provide a good starting point for plan sponsors that are considering offering employee pre-tax contributions to Trump accounts." MORE >>
"The Section 125 cafeteria plan rules provide that employees can make a mid-year health plan election change upon the change in residence of the employee, spouse, or dependent where a) the move affects the individual’s eligibility for coverage under the plan, and b) the health plan election change is consistent with the individual’s change in residence." MORE >>
"Perhaps the biggest open question: Will Trump Accounts be subject to ERISA? ... [Until] guidance arrives, employers face uncertainty about fiduciary obligations, reporting requirements, and administrative burdens.... Early adopters like the major financial institutions have the resources and expertise to navigate ambiguity. For most employers, waiting for final regulations and ERISA guidance before committing may be the prudent path." MORE >>
"To contribute to employees' Trump accounts starting as soon as July 4, 2026, an employer must establish a [Trump account contribution program (TACP)] ... [E]arly TACP adoption poses the risk that the final Trump account regulations, expected in 2026, will impose new obligations on TACP design and administration. Additionally, it remains unclear whether TACPs are 'employee welfare benefit plans' under [ERISA]." MORE >>
