Executive Compensation, ERISA + Employee Benefits

Many employers have established “cafeteria plans” under Section 125 of the Internal Revenue Code. These plans permit employers to pay various expenses with “pre-tax” money (e.g. flex plans, etc.) and broadly provide employees with a suite of benefits from which they can choose based on their individual needs. In order to comply with various legal requirements, these plans need to be amended no later than December 31, 2014. Failing to amend a “cafeteria plan” may result in the plan’s losing its qualified status and the benefits provided to employees becoming taxable.

Required amendments include*:

• Providing for a $2,500 limit on salary contributions to health flexible spending arrangements (for plan years 2013 and 2014) and $2,550 for 2015
• Complying with the US Supreme Court’s decision in Windsor v. United States, which found Section 3 of the Defense of Marriage Act unconstitutional (Employers with cafeteria plans which define “marriage,” “spouse” and similar terms should review such definitions to ensure they comply with the Windsor decision and treat same-sex spouses the same as opposite-sex spouses)
• Implementing the $500 carry-over of unused FSA contributions instead of the 2 ½ month grace period, if desired (a plan can use either the $500 carry-over or the 2 ½ month grace period, but not both).