Cafeteria Plan Transition Rules

Cafeteria Plan Transition RulesImage

Recent proposed regulations include transition relief for calendar year Section 125/cafeteria plans, so that in January 2014, employees of an applicable large employer making salary reduction elections to pay for group health coverage can stop those deferrals in order to purchase individual coverage on an exchange.

Additionally, employees who had waived enrollment in employer group health coverage could enroll effective January 1, 2014, in order to avoid penalties under the individual mandate and could elect to pay their portion of premiums on a pre-tax basis through the cafeteria plan.


This cafeteria plan transition rule only applies to fiscal year plans and then only to employees’ elections to pay for group health coverage on a pre-tax basis and not to health flexible spending accounts or dependent care accounts. These changes in election rules, if adopted by an applicable large employer, must be in the written cafeteria plan document.

Retroactive amendments may be made any time by December 31, 2014 and must be effective retroactively to the date of the first day of the 2013 plan year of the cafeteria plan.


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