Section 125 cafeteria plans provide the gateway to employee pre-tax contributions for health and welfare plan benefits and FSAs. Employers’ ability to offer pre-tax salary reduction contributions is the product of a complex system of cafeteria plan rules designed to avoid constructive receipt—a concept that most have never considered. The Section 125 irrevocable election, plan document, use-it-or-lose-it, and other key rules are very strict, and there is no correction program to prevent a potential full loss of tax-advantaged status upon plan operational failures.
This session of Newfront Office Hours covers the key Section 125 cafeteria plan rules that all employers should understand.
Thursday, July 17, 2025 10:00am - 10:45am PT
Speaker
Brian Gilmore
Lead Benefits Counsel, VP
Topics for Discussion
Why Section 125 Matters: The safe harbor from the doctrine of constructive receipt
Plan Document: The cafeteria plan document adoption and content requirements for employers
Making/Changing Elections: The irrevocable election requirement, and the exceptions that may apply
Use-It-Or-Lose-It: Grace periods, run-out periods, carryover, forfeitures, and more!
Nondiscrimination: Overview of the NDT rules for each component, deep dive into the 55% average benefits test
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