The IRS Gives Its Final Word On Cafeteria Plan Election Changes

On January 10, 2001, the IRS issued final regulations that revise the final and proposed cafeteria plan regulations issued March 23, 2000. The 2001 regulations address all of the "changes in status" for which a cafeteria plan may permit mid-year election changes. For example, if a cafeteria plan participant has a change in marital status, employment status or dependent status that affects the participant's eligibility, then the plan may permit the participant to make a corresponding change to his or her cafeteria plan election in the middle of the plan year. The 2001 regulations also provide final guidance concerning mid-year election changes that are permitted due to changes in "cost or coverage" under a cafeteria plan.