Treasury, IRS Issue New Proposed Cafeteria Plan Regulations

Source: U.S. Department of the Treasury and the Internal Revenue Service, HP-526, August 3, 2007

The Treasury Department and the IRS issued today new proposed regulations for employee benefit plans under Section 125 of the Internal Revenue Code. The plans, called “cafeteria plans,” allow employees to make a choice between receiving taxable cash compensation or tax-free employee benefits, such as health care, dependent care, and other fringe benefits.
The new proposed regulations generally preserve the rules of the existing proposed regulations, while adding clarifications relating to statutory changes and administrative guidance changes since the previous regulations were published. The new regulations also address many issues on which the IRS has previously provided informal guidance.

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