Tax Treatment of Cafeteria Plans

DEPARTMENT OF THE TREASURY
Internal Revenue Service 26 CFR Part 1 REG-209461-79 RIN 1545-AY67

TITLE: Tax Treatment of Cafeteria Plans

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Partial withdrawal of notice of proposed rulemaking and
amendments to notice of proposed rulemaking.

SUMMARY: This document withdraws §1.125-2 Q&A-6(b),(c), and
(d), and amends §1.125-2 Q&A-6(a) in the notice of proposed
rulemaking relating to cafeteria plans that was published in the
Federal Register on March 7, 1989. Further, this document amends
§1.125-1 Q&A-8 in the notice of proposed rulemaking relating to
cafeteria plans that was published in the Federal Register on May 7,
1984, and amended on November 7, 1997 and March 23, 2000. This
withdrawal and amendment are made because of changes made to these
rules in the §1.125-4 final regulations relating to cafeteria
plans published elsewhere in this issue of the Federal Register.

DATES: Written or electronically generated comments and requests for
a public hearing must be received by April 10, 2001.

ADDRESSES: Send submission to: CC:M&SP:RU (REG-209461-79), room
5226, Internal Revenue Service, POB 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may be hand delivered Monday
through Friday between the hours of 8.2 a.m. and 5 p.m. to
CC:M&SP:RU (REG-209461-79), Courier's Desk, Internal Revenue
Service, 1111 Constitution Avenue, NW., Washington, DC.
Alternatively, taxpayers may submit comments electronically via the
Internet by selecting the "Tax Regs" option on the IRS Home Page, or
by submitting comments directly to the IRS Internet site at
http://www.irs.gov/tax_regs/regslist.html.

FOR FURTHER INFORMATION CONTACT: Christine Keller or Janet Laufer at
(202)622-6080 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

On March 7, 1989, the IRS issued proposed regulations §1.125-2
Q&A-6 relating to the circumstances under which participants may
revoke existing elections and make new elections under a cafeteria
plan. Elsewhere in this issue of the Federal Register the IRS is
publishing final regulations under § 1.125-4 that address
certain parts of this rule. Accordingly, §1.125-2 Q&A-6(b),
(c), and (d) are withdrawn and §1.125-2 Q&A-6(a) of this rule
is amended.

Further, on May 7, 1984, the IRS issued proposed regulations
§1.125-1 Q&A-8 relating to the requirements that apply to
participants' elections under a cafeteria plan. Q&A-8 of these
regulations was amended on November 7, 1997 and March 23, 2000 to
conform with the §1.125-4T and §1.125-4 regulations
published on these dates, and is further amended to conform with the
final §1.125-4 regulations published on January 10, 2001.

Partial Withdrawal of Notice of Proposed Rulemaking

Accordingly, under the authority of 26 U.S.C. 7805, §1.125-2
Q&A-6(b), (c) and (d) in the notice of proposed rulemaking that was
published on March 7, 1989 (54 FR 9460) is withdrawn.

List of Subjects in 26 CFR Part 1

Income taxes, Reporting and recordkeeping requirements.

Amendments to Previously Proposed Rules

Accordingly, the proposed rules published on May 7, 1984 (49 FR
19321) and amended on November 7, 1997 (62 FR 60196), and March 23,
2000 (65 FR 15587) and the rules published on March 7, 1989 (54 FR
9460) are amended as follows:

PART 1-- INCOME TAXES

Paragraph 1. The authority citation for part 1 continues to read in
part as follows:

Authority: 26 U.S.C. 7805 * * *

Par. 2. In §1.125-1, as proposed May 7, 1984 (49 FR 19321) and
as amended March 23, 2000 (65 FR 15587), Q&A-8 is amended by
removing the last four sentences of A-8 and adding a sentence in
their place to read as follows: §1.125-1 Questions and answers
relating to cafeteria plan.

* * * * *

Q-8: What requirements apply to participants' elections under a
cafeteria plan?

A-8: * * * However, a cafeteria plan may permit a participant to
revoke a benefit election after the period of coverage has commenced
and make a new election with.4 respect to the remainder of the
period of coverage if both the revocation and the new election are
permitted under § 1.125-4.

* * * * *

Par. 3. In §1.125-2, as proposed March 7, 1989 (54 FR 9460) and
as amended March 23, 2000 (65 FR 15587), A-6 is amended by removing
A-6(b), A-6(c), and A-6( d), redesignating A-6(e) as paragraph
A-6(b), removing the last 5 sentences of A-6(a) and adding a
sentence in their place to read as follows:

Q-6: In what circumstance may participants revoke existing elections
and make new elections under a cafeteria plan?

A-6: * * *

(a) * * * However, to the extent permitted under §1.125-4, the
terms of a cafeteria plan may permit a participant to revoke an
existing election and to make a new election with respect to the
remaining portion of the period of coverage.

* * * * *

Deputy Commissioner of Internal Revenue

SEARCH:

You can search the entire Tax Professionals section, or all of Uncle Fed's Tax*Board. For a more focused search, put your search word(s) in quotes.

2001 Regulations Main | IRS Regulations Main | Home