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Cafeteria Plan Compliance Alert

Please read this important notice affecting cafeteria plan sponsors.


Health care reform¹ limits the salary reduction contributions under a health flexible spending account to a maximum of $2,500 per plan year effective as of plan years beginning after December 31, 2012 (January 1, 2013 for calendar year plans). Plan sponsors may elect to set a lower maximum salary reduction for their health flexible spending account and employer non-elective contributions do not count towards this limit unless participants have the option to cash out employer contributions.

While cafeteria plan sponsors will have until the end of 2014 to amend their cafeteria plan documents, the $2,500 maximum must be in place administratively as early as January 1, 2013, requiring adjustments to payroll systems, enrollment forms, and administrative procedures. In addition, participant communications, such as summaries of material modifications, and open enrollment materials for the 2013 plan year need to reflect this new limit in order to prepare participants for changes to their health flexible spending account election options.

If you have questions regarding this change, or need assistance in preparing amendments, summaries of material modifications, reviewing participant communications, or would like information regarding other aspects of health care reform, please contact our office.

Boutwell Fay LLP

1 Park Plaza, Suite 600

Irvine, California 92614

(949) 660-0481

© December 2012 Boutwell Fay LLP

This article is for informational purposes only and does not constitute legal or tax advice. Transmission of this information is not intended to create, and receipt does not constitute, an attorney-client relationship. Anyone viewing this article should not act upon this information without seeking professional counsel. The information contained herein is valid as of the copyright date, and should not be relied upon after that date.


¹ The Patient Protection and Affordable Care Act (“PPACA”), Health Care and Education Reconciliation Act of 2010 (“HCERA”) and subsequent guidance.

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