Comments Concerning Cafeteria Plan Regulations
Under Internal Revenue Code Section 125

I.  Purpose of Submission

The purpose of this submission is to raise and discuss issues in response to the Department of Treasury’s request for comments in the preamble to the Prop. Treas. Reg. 1.125-4(f) published on March 23, 2000. The Prop. Treas. Reg. §1.125-4 (the "Proposed 2000 Regulations") would amend previously issued Prop. Treas. Reg. §§1.125-1 and 1.125-2 and supplement the Final Treas. Reg. § 1.125-4, also published in March 23, 2000 (the "Final 2000 Regulations") to (a) extend the change in status rules to dependent care and adoption assistance plans, and (b) include significant cost or coverage changes as permitted election changes in the Final 2000 Regulations. The Final 2000 Regulations replace the 1997 Temporary Regulations and provide guidance on permitted election changes for cafeteria plans.

This submission addresses issues raised by the discussion in the preamble to the Proposed 2000 Regulations with respect to situations in which participants may elect to change elections during the plan year for a "cafeteria plan" established under Section 125 of the Internal Revenue Code of 1986, as amended (the "Code"). We congratulate the Department of Treasury Department ("Treasury") and the Internal Revenue Service ("Service") on their efforts to address important issues of concern to employers and employees and appreciate their consideration of this matter.