Comments Concerning Cafeteria Plan Regulations
Under Internal Revenue Code Section 125 III. Comments E. Comments on the Final 2000 Regulations and previously issued cafeteria plan regulations - Guidance on non-discrimination testing
Code §125(b) sets forth 3 nondiscrimination standards: - Discrimination is prohibited in favor of highly compensated individuals with respect to eligibility to participate. Code §125(b)(1)(A).
- Discrimination is prohibited in favor of highly compensated participants with respect to both contributions and benefits. Code §125(b)(1)(B).
- The statutory nontaxable benefits provided to key employees cannot exceed 25 percent of the total nontaxable benefits provided for all employees under the plan. Code §125(b)(2).
However, these tests are somewhat confusing and there is very little guidance published by the Service on the discrimination tests. We would appreciate an opportunity to provide comments on issues with respect to the nondiscrimination tests.
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