Comments Concerning Cafeteria Plan Regulations
Under Internal Revenue Code Section 125 III. Comments D. Effective Date of the Proposed 2000 Regulations - Service Request for Comments
The Service requested comments on the lead-time necessary for employers to implement the Proposed 2000 Regulations after they are adopted as final regulations. The Proposed 2000 Regulations do not provide for an effective date. However, employers may rely on the Proposed 2000 Regulations as of March 23, 2000. The Final 2000 Regulations are applicable for cafeteria plan years beginning on or after January 1, 2001. However, employers may rely on the Final 2000 Regulations as of March 23, 2000. - Recommendation
We recommend that employers have at least a one-year period of lead-time once the Proposed 2000 Regulations are adopted as final regulations. This lead-time will afford employers an opportunity to make the necessary changes to their benefit programs, revise and/or restate plan documents, summary plan descriptions and/or prepare summaries of material modifications. In addition, such lead-time will allow human resources professionals sufficient time to familiarize themselves with the regulations. In addition, because the Proposed 2000 Regulations offer flexibility to both employers and employees, the Service should consider offering transition relief that would permit employers to immediately adopt the changes contained in the final regulations without plan amendment provided that (a) such changes were communicated to employees prior to the employer implementing the changes contained in the final regulations, (b) the employer’s cafeteria plan is operated in compliance with the final regulations, and (c) the employer amends its cafeteria plan by the end of the plan year following the year in which the Proposed 2000 Regulations are finalized.
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