Internal Revenue Service issues proposed regulations regarding cafeteria plans
The Internal Revenue Service (IRS) has issued proposed regulations regarding cafeteria plans. The Internal Revenue Code allows employers to offer employees a choice between cash and a variety of nontaxable benefits such as health insurance. A cafeteria plan may include a flexible spending account (FSA), which allows employees to pay for health and dependant care expenses with pre-tax dollars. The new proposed regulations withdraw previous proposed regulations issued in 1984, 1989, 1997, and 2000. The new proposed regulations include changes to tax law since the prior regulations were proposed. These changes include a change in the definition of dependent, and the addition of the following qualified benefits: adoption assistance, additional deferred compensation, health savings accounts (HSAs), and qualified HSA distributions from a health FSAs. Other changes include the prohibition against long-term care insurance and long-term care services. According to the IRS, most of the requirements related to health and dependent care FSAs "remain substantially unchanged." Comments must be recieved by November 15, 2007.
72 Fed. Reg. 43,940 (Aug. 6, 2007)
[Proposed regulation]