Comments Concerning Cafeteria Plan Regulations
Under Internal Revenue Code Section 125

II.  Executive Summary

The comments suggest that when the Proposed 2000 Regulations are finalized, they should be revised as follows:

1. expand and clarify the significant cost or coverage changes so that:
    
2. 1. employees may make election changes that correspond with a change made under the plan of the employee’s domestic partner;
       
   2. employees may make election changes when there is a significant decrease in the cost of coverage;
       
   3. the significant cost or coverage rules apply to Health FSAs;
       
   4. employees may change their elections when there is a substantial decrease or increase in the composition of the service providers of an HMO or Preferred Provider Network;
       
   5. the word "significant" is defined to require the use of uniform and objective standards; and
       
   6. the permitted election change rules are a "safe harbor" and employers may allow other events to qualify as permitted election changes;
       
3. expand the permitted election changes due to an individual’s eligibility or ineligibility for coverage under the State Children’s Health Insurance Program;
    
4. simplify the Proposed and Final 2000 Regulations by combining them into one document; and
    
5. provide employers with lead time of one (1) year to implement the changes in their benefits plans and corresponding documents and provide transition relief so that employers can immediately adopt the changes when they are finalized without plan amendments.

In addition, the comments briefly raise several issues in the Final Regulations that the IRS should consider as part of its project to clarify and streamline the cafeteria plan regulations.