Comments Concerning Cafeteria Plan Regulations
Under Internal Revenue Code Section 125

III.  Comments

C.  Clarity of the Regulations

1. Service Request for Comments

2. In the preamble to the Proposed 2000 Regulations, the Service requested comments on the clarity of the Proposed 2000 Regulations and how they may be made easier to understand.

3. Concerns

4. We respectfully submit that although the Proposed 2000 Regulations offer flexibility to both employees and employers, they are somewhat cumbersome because the reader must review several other sets of regulations to fully understand the importance of the Proposed 2000 Regulations.

   In the past sixteen years, multiple sets of regulations have been issued under § 125 Code in proposed, temporary and final form. The most recent set of regulations, the Proposed and the Final 2000 Regulations, are contained in separate documents. The two sets of regulations, however, continually cross-reference one another and the previously issued regulations and consequently must be read together. For example, the Proposed 2000 Regulations use a term “benefits package option”, which is defined in the Final 2000 Regulations. The significant cost and coverage rules in the Proposed 2000 Regulations expand the Final 2000 Regulations, which were published on the same day as the Proposed 2000 Regulations.

5. Recommendation

6. Accordingly, it is recommended that the Proposed and Final 2000 Regulations be simplified and combined into one document. In the Proposed 2000 Regulations, the Service stated that the Proposed and Final 2000 Regulations are an integrated package. Furthermore, we respectfully request that the Service consider re-issuing the cafeteria plan regulations (both proposed and final) in one document. Combining the regulations into one document would dramatically improve the clarity of the regulations and ease employer compliance.

   As currently issued, it is easy for employers to incorrectly administer cafeteria plans or shy away from such plans because of the administrative burden in understanding how all of the regulations work together. All of the cafeteria plan regulations form an integrated package of rules for administering cafeteria plans. Changes made to one set of the cafeteria plan regulations impact another set of cafeteria plan regulations, even if both sets are not formally changed. We welcome an opportunity to provide additional comments on the impact of integrating all of the cafeteria plan regulations into one document.