June 2000


In March, the IRS and Treasury Department released final regulations and additional proposed regulations relating to cafeteria plans under section 125.

The final regulations consider a change in the employment status of the employee, spouse, or dependent that affects the individual's eligibility under a cafeteria plan to be a change in status. In addition, a change in the employee's marital status or a change in the employment status of the employee's spouse or dependent may allow an increase or decrease in group term life insurance.

Under the proposed regulations (REG-117162-99), employees are allowed to make changes in election due to cost and coverage changes including the following:

* The addition of a new benefit package option or the elimination of an option
* A coverage change made under a plan of the spouse's or dependent's employer
* A significant increase in cost of coverage.

Furthermore, changing the number of qualifying individuals will constitute a change in status for dependent care assistance, and the commencement or termination of an adoption proceeding will constitute a change in status for adoption assistance. *

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