Newly proposed
regulations for cafeteria benefit plans clarify that they are generally the
only way to preserve the nontaxable nature of employer-provided benefits when
employees are allowed to elect between taxable compensation and nontaxable
benefits. Issued by the U.S. Treasury Department and the IRS, the proposals
also include new rules for determining if a cafeteria plan improperly discriminates
in favor of highly compensated employees and provide guidance on grace periods
for using money in health flexible spending accounts after the end of a plan
year.