IRS Benefit Documentation for Cafeteria Plans. Are you compliant?

Recently, the IRS conducted audits of employers to confirm that the proper documentation for written benefit plans existed in accordance with the Internal Revenue Code. Proper documentation is necessary to receive the tax benefits for providing health and welfare benefits to employees.


Below is a refresher on why compliance with this requirement is important – and how to ensure you continue to stay compliant!


Why does this IRS requirement matter to my organization?

  • As an employer, you are required to satisfy certain conditions in order to provide employees with health and welfare benefits
  • The IRS code provides specific guidance on the required documentation that your organization must possess to remain compliant


For cafeteria plans, what parts of the code matter to me?

  • Section 125: cafeteria plans, flexible benefit plans, and premium only plans
  • Section 105: health FSAs
  • Section 129: dependent care assistance programs or dependent care FSAs


What should I do to stay compliant?

  • Review what documentation you currently have and determine compliance
  • Create a list of all of the benefits you currently offer your employees and determine which apply under the Code


What should I be looking for?

  • Updated documents with latest employer information on plans in the proper format
  • Necessary approvals of the plan documents by leadership or governing body of your organization


What are the potential penalties?

  • Loss of eligibility of tax benefit for providing these plans to employees
  • Re-characterization of previous benefits as taxable wages
  • Additional tax payments or other financial penalties


Interested in learning more? Full details on the Code here!

Want more articles like this? Reach out to

Benefit Resource, LLC
PO BOX 642
Willow Grove, PA 19090

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