Internal Revenue Code:Sec. 125. Cafeteria plans
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Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
Statute
Sec. 125. Cafeteria plans
(a) General rule
Except as provided in subsection (b), no amount shall be included
in the gross income of a participant in a cafeteria plan solely
because, under the plan, the participant may choose among the
benefits of the plan.
(b) Exception for highly compensated participants and key employees
(1) Highly compensated participants
In the case of a highly compensated participant, subsection (a)
shall not apply to any benefit attributable to a plan year for
which the plan discriminates in favor of -
(A) highly compensated individuals as to eligibility to
participate, or
(B) highly compensated participants as to contributions and
benefits.
(2) Key employees
In the case of a key employee (within the meaning of section
416(i)(1)), subsection (a) shall not apply to any benefit
attributable to a plan for which the statutory nontaxable
benefits provided to key employees exceed 25 percent of the
aggregate of such benefits provided for all employees under the
plan. For purposes of the preceding sentence, statutory
nontaxable benefits shall be determined without regard to the
last sentence of subsection (f).
(3) Year of inclusion
For purposes of determining the taxable year of inclusion, any
benefit described in paragraph (1) or (2) shall be treated as
received or accrued in the taxable year of the participant or key
employee in which the plan year ends.
(c) Discrimination as to benefits or contributions
For purposes of subparagraph (B) of subsection (b)(1), a
cafeteria plan does not discriminate where qualified benefits and
total benefits (or employer contributions allocable to qualified
benefits and employer contributions for total benefits) do not
discriminate in favor of highly compensated participants.
(d) Cafeteria plan defined
For purposes of this section -
(1) In general
The term ''cafeteria plan'' means a written plan under which -
(A) all participants are employees, and
(B) the participants may choose among 2 or more benefits
consisting of cash and qualified benefits.
(2) Deferred compensation plans excluded
(A) In general
The term ''cafeteria plan'' does not include any plan which
provides for deferred compensation.
(B) Exception for cash and deferred arrangements
Subparagraph (A) shall not apply to a profit-sharing or stock
bonus plan or rural cooperative plan (within the meaning of
section 401(k)(7)) which includes a qualified cash or deferred
arrangement (as defined in section 401(k)(2)) to the extent of
amounts which a covered employee may elect to have the employer
pay as contributions to a trust under such plan on behalf of
the employee.
(C) Exception for certain plans maintained by educational
institutions
Subparagraph (A) shall not apply to a plan maintained by an
educational organization described in section 170(b)(1)(A)(ii)
to the extent of amounts which a covered employee may elect to
have the employer pay as contributions for post-retirement
group life insurance if -
(i) all contributions for such insurance must be made
before retirement, and
(ii) such life insurance does not have a cash surrender
value at any time.
For purposes of section 79, any life insurance described in the
preceding sentence shall be treated as group-term life
insurance.
(D) Exception for health savings accounts.--
Subparagraph (A) shall not apply to a plan to the extent
of amounts which a covered employee may elect to have
the employer pay as contributions to a health savings
account established on behalf of the employee.
(e) Highly compensated participant and individual defined
For purposes of this section -
(1) Highly compensated participant
The term ''highly compensated participant'' means a participant
who is -
(A) an officer,
(B) a shareholder owning more than 5 percent of the voting
power or value of all classes of stock of the employer,
(C) highly compensated, or
(D) a spouse or dependent (within the meaning of section 152,
determined without regard to subsections (b)(1), (b)(2), and
(d)(1)(B) thereof) of an individual described in subparagraph (A),
(B), or (C).
(2) Highly compensated individual
The term ''highly compensated individual'' means an individual
who is described in subparagraphs (FOOTNOTE 1) (A), (B), (C), or
(D) of paragraph (1).
(FOOTNOTE 1) So in original. Probably should be
''subparagraph''.
(f) Qualified benefits defined
For purposes of this section, the term ''qualified benefit''
means any benefit which, with the application of subsection (a), is
not includible in the gross income of the employee by reason of an
express provision of this chapter (other than section 106(b), 117,
127, or 132). Such term includes any group term life insurance
which is includible in gross income only because it exceeds the
dollar limitation of section 79 and such term includes any other
benefit permitted under regulations. Such term shall not include
any product which is advertised, marketed, or offered as long-term
care insurance.
(g) Special rules
(1) Collectively bargained plan not considered discriminatory
For purposes of this section, a plan shall not be treated as
discriminatory if the plan is maintained under an agreement which
the Secretary finds to be a collective bargaining agreement
between employee representatives and one or more employers.
(2) Health benefits
For purposes of subparagraph (B) of subsection (b)(1), a
cafeteria plan which provides health benefits shall not be
treated as discriminatory if -
(A) contributions under the plan on behalf of each
participant include an amount which -
(i) equals 100 percent of the cost of the health benefit
coverage under the plan of the majority of the highly
compensated participants similarly situated, or
(ii) equals or exceeds 75 percent of the cost of the health
benefit coverage of the participant (similarly situated)
having the highest cost health benefit coverage under the
plan, and
(B) contributions or benefits under the plan in excess of
those described in subparagraph (A) bear a uniform relationship
to compensation.
(3) Certain participation eligibility rules not treated as
discriminatory
For purposes of subparagraph (A) of subsection (b)(1), a
classification shall not be treated as discriminatory if the plan
-
(A) benefits a group of employees described in section
410(b)(2)(A)(i), and
(B) meets the requirements of clauses (i) and (ii):
(i) No employee is required to complete more than 3 years
of employment with the employer or employers maintaining the
plan as a condition of participation in the plan, and the
employment requirement for each employee is the same.
(ii) Any employee who has satisfied the employment
requirement of clause (i) and who is otherwise entitled to
participate in the plan commences participation no later than
the first day of the first plan year beginning after the date
the employment requirement was satisfied unless the employee
was separated from service before the first day of that plan
year.
(4) Certain controlled groups, etc.
All employees who are treated as employed by a single employer
under subsection (b), (c), or (m) of section 414 shall be treated
as employed by a single employer for purposes of this section.
(h) Cross reference
For reporting and recordkeeping requirements, see section
6039D.
(i) Regulations
The Secretary shall prescribe such regulations as may be
necessary to carry out the provisions of this section.
Sources
(Added Pub. L. 95-600, title I, Sec. 134(a), Nov. 6, 1978, 92 Stat.
2783; amended Pub. L. 96-222, title I, Sec. 101(a)(6)(A), Apr. 1,
1980, 94 Stat. 196; Pub. L. 96-605, title II, Sec. 201(b)(2),
226(a), Dec. 28, 1980, 94 Stat. 3527, 3529; Pub. L. 96-613, Sec.
5(b)(2), Dec. 28, 1980, 94 Stat. 3581; Pub. L. 98-369, div. A,
title V, Sec. 531(b)(1)-(4)(A), July 18, 1984, 98 Stat. 881, 882;
Pub. L. 98-611, Sec. 1(d)(3)(A), Oct. 31, 1984, 98 Stat. 3177; Pub.
L. 98-612, Sec. 1(b)(3)(B), Oct. 31, 1984, 98 Stat. 3181; Pub. L.
99-514, title XI, Sec. 1151(d)(1), title XVIII, Sec. 1853(b)(1),
Oct. 22, 1986, 100 Stat. 2504, 2870; Pub. L. 100-647, title I, Sec.
1011B(a)(11)-(13), 1018(t)(6), title IV, Sec. 4002(b)(2), title VI,
Sec. 6051(b), Nov. 10, 1988, 102 Stat. 3484, 3485, 3589, 3643,
3696; Pub. L. 101-140, title II, Sec. 203(a)(1), (3), (b)(2), Nov.
8, 1989, 103 Stat. 830, 831; Pub. L. 101-239, title VII, Sec.
7814(b), Dec. 19, 1989, 103 Stat. 2413; Pub. L. 101-508, title XI,
Sec. 11801(c)(3), Nov. 5, 1990, 104 Stat. 1388-523; Pub. L.
104-191, title III, Sec. 301(d), 321(c)(1), Aug. 21, 1996, 110
Stat. 2051, 2058.)
Codification
CODIFICATION
Pub. L. 101-140, Sec. 203(a)(1), amended this section to read as
if the amendments made by section 1151(d)(1) of Pub. L. 99-514
(amending this section generally) had not been enacted. Subsequent
to amendment by Pub. L. 99-514, this section was amended by Pub. L.
100-647 and Pub. L. 101-239. See 1989 and 1988 Amendment notes
below.
Miscellaneous
PRIOR PROVISIONS
A prior section 125 was renumbered section 140 of this title.
AMENDMENTS
2004 - Pub.L.108-311 Sec 207(11). Section 125(e)(1)(D) is amended
by inserting ``, determined without regard to subsections (b)(1),
(b)(2), and (d)(1)(B) thereof'' after ``section 152''.
2003 - Pub. L. 108-173, Sec. 1201(i) amended Subsec. (d)(2) by
inserting new paragraph (D) relating to health saving accounts.
The amendments shall apply to taxable years beginning after
December 31, 2003.
1996 - Subsec. (f). Pub. L. 104-191, Sec. 321(c)(1), inserted at
end ''Such term shall not include any product which is advertised,
marketed, or offered as long-term care insurance.''
Pub. L. 104-191, Sec. 301(d), inserted ''106(b),'' before
''117''.
1990 - Subsec. (f). Pub. L. 101-508 substituted ''section 117,''
for ''section 117, 124,''.
1989 - Pub. L. 101-140, Sec. 203(a)(1), amended section to read
as if amendments by Pub. L. 99-514, Sec. 1151(d)(1), had not been
enacted, see 1986 Amendment note below.
Subsec. (d)(2). Pub. L. 101-140, Sec. 203(b)(2), amended par. (2)
generally. Prior to amendment, par. (2) read as follows: ''The
term 'cafeteria plan' does not include any plan which provides for
deferred compensation. The preceding sentence shall not apply in
the case of a profit-sharing or stock bonus plan which includes a
qualified cash or deferred arrangement (as defined in section
401(k)(2)) to the extent of amounts which a covered employee may
elect to have the employer pay as contributions to a trust under
such plan on behalf of the employee.''
Subsec. (e)(2)(A). Pub. L. 101-239 substituted ''includible only
because'' for ''includable only because'', see Codification note
above.
Subsec. (g)(3)(A). Pub. L. 101-140, Sec. 203(a)(3), substituted
''section 410(b)(2)(A)(i)'' for ''subparagraph (B) of section
410(b)(1)''.
1988 - Subsec. (a). Pub. L. 100-647, Sec. 1011B(a)(11)(A),
amended subsec. (a) generally, see Codification note above. Prior
to amendment, subsec. (a) read as follows: ''In the case of a
cafeteria plan -
''(1) amounts shall not be included in gross income of a
participant in such plan solely because, under the plan, the
participant may choose among the benefits of the plan, and
''(2) if the plan fails to meet the requirements of subsection
(b) for any plan year -
''(A) paragraph (1) shall not apply, and
''(B) notwithstanding any other provision of part III of this
subchapter, any qualified benefits received under such
cafeteria plan by a highly compensated employee for such plan
year shall be included in the gross income of such employee for
the taxable year with or within which such plan year ends.''
Subsec. (b)(1). Pub. L. 100-647, Sec. 1011B(a)(11)(B),
substituted ''In the case of a highly compensated employee,
subsection (a) shall not apply to any benefit attributable to a
plan year'' for ''A plan shall be treated as failing to meet the
requirements of this subsection'', see Codification note above.
Subsec. (b)(2). Pub. L. 100-647, Sec. 1011B(a)(11)(C),
substituted ''subsection (a) shall not apply to any plan year'' for
''a plan shall be treated as failing to meet the requirements of
this subsection'' in first sentence, see Codification note above.
Pub. L. 100-647, Sec. 1011B(a)(13)(B), substituted ''shall not
include benefits which (without regard to this paragraph) are
includible in gross income'' for ''shall be determined without
regard to the last sentence of subsection (e)'', see Codification
note above.
Subsec. (c)(1)(B). Pub. L. 100-647, Sec. 1011B(a)(12), amended
subpar. (B) generally, see Codification note above. Prior to
amendment, subpar. (B) read as follows: ''the participants may
choose -
''(i) among 2 or more benefits consisting of cash and qualified
benefits, or
''(ii) among 2 or more qualified benefits.''
Subsec. (c)(2)(B). Pub. L. 100-647, Sec. 1018(t)(6), inserted
''or rural electric cooperative plan (within the meaning of section
401(k)(7))'' after ''stock bonus plan'', see Codification note
above.
Subsec. (c)(2)(C). Pub. L. 100-647, Sec. 6051(b), inserted at end
''In applying section 89 to a plan described in this subparagraph,
contributions under the plan shall be tested as of the time the
contributions were made.'', see Codification note above.
Subsec. (e)(1). Pub. L. 100-647, Sec. 1011B(a)(13)(A), inserted
''and without regard to section 89(a)'' after ''subsection (a)'',
see Codification note above.
Subsec. (e)(2)(A). Pub. L. 100-647, Sec. 4002(b)(2), inserted
''or any insurance under a qualified group legal services plan the
value of which is so includable only because it exceeds the
limitation of section 120(a)'' after ''section 79'', see
Codification note above.
1986 - Pub. L. 99-514, Sec. 1151(d)(1), amended section
generally, revising and restating as subsecs. (a) to (g) provisions
of former subsecs. (a) to (i) so as to coincide with the coming
into effect of section 89 of this title.
Subsecs. (c), (d)(1)(B). Pub. L. 99-514, Sec. 1853(b)(1)(A),
substituted ''qualified benefits'' for ''statutory nontaxable
benefits'' wherever appearing.
Subsec. (f). Pub. L. 99-514, Sec. 1853(b)(1)(B), substituted
''Qualified benefits defined'' for ''Statutory nontaxable benefits
defined'' in heading and amended text generally. Prior to
amendment, text read as follows: ''For purposes of this section,
the term 'statutory nontaxable benefit' means any benefit which,
with the application of subsection (a) is not includible in the
gross income of the employee by reason of an express provision of
this chapter (other than section 117, 124, 127, or 132). Such term
includes any group term life insurance which is includible in gross
income only because it exceeds the dollar limitation of section
79.''
1984 - Subsec. (b). Pub. L. 98-369, Sec. 531(b)(3), amended
subsec. (b) generally, substituting ''and key employees'' for
''where plan is discriminatory'' in heading and ''Highly
compensated participants'' for ''In general'' in par. (1) heading,
adding par. (2), redesignating former par. (2) as (3), and
inserting therein references to par. (2) and to taxable year of key
employee.
Subsec. (c). Pub. L. 98-369, Sec. 531(b)(2)(B), inserted
''statutory'' before ''nontaxable benefits'' in two places.
Subsec. (d)(1). Pub. L. 98-369, Sec. 531(b)(1), substituted
''among 2 or more benefits consisting of cash and statutory
nontaxable benefits'' for ''among two or more benefits'' in cl. (B)
and struck out ''The benefits which may be chosen may be nontaxable
benefits, or cash, property, or other taxable benefits.''
Subsec. (f). Pub. L. 98-369, Sec. 531(b)(2)(A), amended subsec.
(f) generally, inserting ''Statutory'' in heading and ''statutory''
before ''nontaxable benefit'' in text, providing that the benefit
be excluded by reason of an express provision of this chapter
(other than section 117, 124, 127, or 132), and extending the
benefit to include group term life insurance.
Subsec. (h). Pub. L. 98-611 and Pub. L. 98-612, made identical
amendments, substituting cross reference provision for reporting
requirements provisions.
Pub. L. 98-369, Sec. 531(b)(4)(A), added subsec. (h) relating to
reporting requirements provisions. Former subsec. (h) redesignated
(i).
Subsec. (i). Pub. L. 98-369, Sec. 531(b)(4)(A), redesignated
subsec. (h) as (i).
1980 - Subsec. (d)(2). Pub. L. 96-605, Sec. 226(a), inserted
provision that the sentence excluding deferred compensation plans
not apply in the case of a profit-sharing or stock bonus plan which
includes a qualified cash or deferred arrangement, as defined in
section 401(k)(2) to the extent of amounts which a covered employee
may elect to have the employer pay as contributions to a trust
under such plan on behalf of the employee.
Subsec. (g)(3)(B). Pub. L. 96-222 substituted ''employment
requirement'' for ''service requirement'' in cls. (i) and (ii).
Subsec. (g)(4). Pub. L. 96-613, Sec. 5(b)(2), and Pub. L. 96-605,
Sec. 201(b)(2), made identical amendments by substituting
''controlled groups, etc.'' for ''controlled groups'' in heading,
and by substituting ''subsection (b), (c), or (m) of section 414''
for ''subsection (b) or (c) of section 414'' in text.
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by section 301(d) of Pub. L. 104-191 applicable to
taxable years beginning after Dec. 31, 1996, see section 301(j) of
Pub. L. 104-191, set out as a note under section 62 of this title.
Amendment by section 321(c)(1) of Pub. L. 104-191 applicable to
contracts issued after Dec. 31, 1996, see section 321(f) of Pub. L.
104-191, set out as an Effective Date note under section 7702B of
this title.
EFFECTIVE DATE OF 1989 AMENDMENTS
Amendment by Pub. L. 101-239 effective, except as otherwise
provided, as if included in the provision of the Technical and
Miscellaneous Revenue Act of 1988, Pub. L. 100-647, to which such
amendment relates, see section 7817 of Pub. L. 101-239, set out as
a note under section 1 of this title.
Amendment by Pub. L. 101-140 effective as if included in section
1151 of Pub. L. 99-514, see section 203(c) of Pub. L. 101-140, set
out as a note under section 79 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by sections 1011B(a)(11)-(13) and 1018(t)(6) of Pub. L.
100-647 effective, except as otherwise provided, as if included in
the provision of the Tax Reform Act of 1986, Pub. L. 99-514, to
which such amendment relates, see section 1019(a) of Pub. L.
100-647, set out as a note under section 1 of this title.
Amendment by section 4002(b)(2) of Pub. L. 100-647 applicable to
taxable years ending after Dec. 31, 1987, see section 4002(c) of
Pub. L. 100-647, set out as a note under section 120 of this title.
Section 6051(c) of Pub. L. 100-647 provided that: ''The
amendments made by this section (amending this section and section
89 of this title) shall take effect as if included in the
amendments made by section 1151 of the Reform Act (Pub. L. 99-514,
see Effective Date of 1986 Amendment note set out under section 79
of this title).''
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 1151(d)(1) of Pub. L. 99-514 applicable,
with certain qualifications and exceptions, to years beginning
after Dec. 31, 1988, see section 1151(k) of Pub. L. 99-514, as
amended, set out as a note under section 79 of this title.
Amendment by section 1853(b)(1) of Pub. L. 99-514 effective,
except as otherwise provided, as if included in the provisions of
the Tax Reform Act of 1984, Pub. L. 98-369, div. A, to which such
amendment relates, see section 1881 of Pub. L. 99-514, set out as a
note under section 48 of this title.
EFFECTIVE DATE OF 1984 AMENDMENTS
Amendment by Pub. L. 98-612 effective Jan. 1, 1985, see section
1(d)(2) of Pub. L. 98-612.
Amendment by Pub. L. 98-611 effective Jan. 1, 1985, see section
1(g)(2) of Pub. L. 98-611, set out as a note under section 127 of
this title.
Amendment by Pub. L. 98-369 effective Jan. 1, 1985, see section
531(h) of Pub. L. 98-369, set out as an Effective Date note under
section 132 of this title.
EFFECTIVE DATE OF 1980 AMENDMENTS
Amendments by section 201(b)(2) of Pub. L. 96-605 and section
5(b)(2) of Pub. L. 96-613 applicable to years ending after Nov. 30,
1980, except in the case of a plan in existence on Nov. 30, 1980
where amendments by section 201(b)(2) of Pub. L. 96-605 and section
5(b)(2) of Pub. L. 96-613 applicable to plan years beginning after
Nov. 30, 1980, see section 201(c) of Pub. L. 96-605 and section
5(c) of Pub. L. 96-613, set out as a note under section 414 of this
title.
Section 226(b) of Pub. L. 96-605 provided that: ''The amendment
made by subsection (a) (amending this section) shall apply with
respect to taxable years beginning after December 31, 1980.''
Amendment by Pub. L. 96-222 effective, except as otherwise
provided, as if it had been included in the provisions of the
Revenue Act of 1978, Pub. L. 95-600, to which such amendment
relates, see section 201 of Pub. L. 96-222, set out as a note under
section 32 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Section 134(c) of Pub. L. 95-600, as amended by Pub. L. 96-222,
title I, Sec. 101(a)(6)(B), Apr. 1, 1980, 94 Stat. 197, provided
that: ''The amendments made by this section (enacting this section)
shall apply to plan years beginning after December 31, 1978.''
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
NONENFORCEMENT OF AMENDMENT MADE BY SECTION 1151 OF PUB. L. 99-514
FOR FISCAL YEAR 1990
No monies appropriated by Pub. L. 101-136 to be used to implement
or enforce section 1151 of Pub. L. 99-514 or the amendments made by
such section, see section 528 of Pub. L. 101-136, set out as a note
under section 89 of this title.
TREATMENT OF PRE-1989 ELECTIONS FOR DEPENDENT CARE ASSISTANCE UNDER
CAFETERIA PLANS
Section 6063 of Pub. L. 100-647 provided that: ''For purposes of
section 125 of the 1986 Code, a plan shall not be treated as
failing to be a cafeteria plan solely because under the plan a
participant elected before January 1, 1989, to receive
reimbursement under the plan for dependent care assistance for
periods after December 31, 1988, and such assistance is includible
in gross income under the provisions of the Family Support Act of
1988 (Pub. L. 100-485, see Tables for classification).''
For provision that for purposes of section 125 of the Internal
Revenue Code of 1986, a plan shall not be treated as failing to be
a cafeteria plan solely because under the plan a participant
elected before January 1, 1988, to receive reimbursement under the
plan for dependent care assistance for periods after December 31,
1987, and such assistance included reimbursement for expenses at a
camp where the dependent stays overnight, see section 10101(b)(2)
of Pub. L. 100-203, as added by Pub. L. 100-647, set out as an
Effective Date of 1987 Amendment note under section 21 of this
title.
EXCEPTION FOR CERTAIN CAFETERIA PLANS AND BENEFITS
Section 531(b)(5) of Pub. L. 98-369, as amended by Pub. L.
99-514, title XVIII, Sec. 1853(b)(2), (3), Oct. 22, 1986, 100 Stat.
2870, 2871, provided that:
''(A) General transitional rule. - Any cafeteria plan in
existence on February 10, 1984, which failed as of such date and
continued to fail thereafter to satisfy the rules relating to
section 125 under proposed Treasury regulations, and any benefit
offered under such a cafeteria plan which failed as of such date
and continued to fail thereafter to satisfy the rules of section
105, 106, 120, or 129 under proposed Treasury regulations, will not
fail to be a cafeteria plan under section 125 or a nontaxable
benefit under section 105, 106, 120, or 129 solely because of such
failures. The preceding sentence shall apply only with respect to
cafeteria plans and benefits provided under cafeteria plans before
the earlier of -
''(i) January 1, 1985, or
''(ii) the effective date of any modification to provide
additional benefits after February 10, 1984.
''(B) Special transition rule for advance election benefit banks.
- Any benefit offered under a cafeteria plan in existence on
February 10, 1984, which failed as of such date and continued to
fail thereafter to satisfy the rules of section 105, 106, 120, or
129 under proposed Treasury regulations because an employee was
assured of receiving (in cash or any other benefit) amounts
available but unused for covered reimbursement during the year
without regard to whether he incurred covered expenses, will not
fail to be a nontaxable benefit under such applicable section
solely because of such failure. The preceding sentence shall apply
only with respect to benefits provided under cafeteria plans before
the earlier of -
''(i) July 1, 1985, or
''(ii) the effective date of any modification to provide
additional benefits after February 10, 1984.
Except as provided in Treasury regulations, the special transition
rule is available only for benefits with respect to which, after
December 31, 1984, contributions are fixed before the period of
coverage and taxable cash is not available until the end of such
period of coverage.
''(C) Plans for which substantial implementation costs were
incurred. - For purposes of this paragraph, any plan with respect
to which substantial implementation costs had been incurred before
February 10, 1984, shall be treated as in existence on February 10,
1984.
''(D) Collective bargaining agreements. - In the case of any
cafeteria plan in existence on February 10, 1984, and maintained
pursuant to 1 or more collective bargaining agreements between
employee representatives and 1 or more employers, the date on which
the last of such collective bargaining agreements terminates
(determined without regard to any extension thereof agreed to after
July 18, 1984) shall be substituted for 'January 1, 1985' in
subparagraph (A) and for 'July 1, 1985' in subparagraph (B). For
purposes of the preceding sentence, any plan amendment made
pursuant to a collective bargaining agreement relating to the plan
which amends the plan solely to conform to any requirement added by
this section (or any requirement in the regulations under section
125 of the Internal Revenue Code of 1954 (now 1986) proposed on May
6, 1984) shall not be treated as a termination of such collective
bargaining agreement.
''(E) Special rule where contributions or reimbursements
suspended. - For purposes of subparagraphs (A) and (B), a plan
shall not be treated as not continuing to fail to satisfy the rules
referred to in such subparagraphs with respect to any benefit
provided in the form of a flexible spending arrangement merely
because contributions or reimbursements (or both) with respect to
such plan were suspended before January 1, 1985.''
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 79, 403, 414, 415, 3121,
3306, 6039D, 7701 of this title; title 42 section 409.
