Cafeteria Plan = Employer Payment Plan? No.

NOTE: This is a follow-up to a previous Capital Connection entry (Compliance of Premium Reimbursement Arrangements) dated Nov. 7, 2014.  


Analysis of the latest round of FAQs further clarifies that the Department’s* prior guidance (i.e. IRS Notice 2013-54) was specifically aimed at health reimbursement arrangements (HRAs) and “employer payment plans”…and does not apply to a Cafeteria Plan under Section 125.

A Section 125 Cafeteria Plan is an IRS Code creation that allows pre-taxed premium for qualified benefits, includes an option for employer funding and requires employee salary reduction. These FAQs do nothing to redefine the term “qualified benefits” under Section 125.** TASC has yet to see a regulatory statement converting a Section 125 Cafeteria Plan into a “group health plan,” thus making it subject to ERISA or PPACA & PHS Act mandates.

As a result, TASC maintains compliance and continues to back its NESP/NEFSA Plans with an Audit Guarantee for all enrolled employers and their Participants. TASC will support and assist enrolled employers or Participants whose Plan is challenged by the IRS. If all procedures and parameters are adhered to, TASC will assume financial responsibility for any penalty and/or interest charged as a result of an audit.

Click here for more information on TASC’s position

* Departments of Labor (DOL), Health and Human Services (HHS), and Treasury
** Public Marketplace Plans are not considered a qualified benefit and premiums cannot be reimbursed; see IRC §125(f)

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