So Many Choices! Cafeteria Style Employee Benefits Stipend Is Okay

Having a choice is nice! Fries or a side salad? Fresh ground pepper on that? In a private letter ruling, the IRS just okayed offering choice to employees, to be communicated at open enrolment, for each employee to elect, irrevocably, to allocate an employer payment (a uniform percentage of pay up to $2,000) for the upcoming year to their 401(k) plan account (as an employer non-elective contribution, vested immediately), or to their health savings account, retiree health reimbursement account, or as educational assistance (which can include student loan payments). The auto-election is to their 401(k) account. A cash option is unavailable. See Private Letter Ruling 202434006. 

Read now »

Related Content

• 401(k) Plans: Understanding the Rules
  See the possibilities. 401(k) plans are really profit sharing or stock bonus plans with a qualified cash or deferred arrangement feature. PLR 202434006 makes clear that cash isn’t an option—so the money the taxpayer-employer provides is a non-elective employer contribution that won’t be subject to the Section 402(g) limit or to ADP testing.  

• Nondiscrimination Testing in 401(k) Plans: ADP and ACP Tests
  Reference this practice note setting forth the rules for testing elective deferrals, employer matching contributions, and employer non-elective contributions for non-safe harbor features in a 401(k) plan.

Practical Guidance Updates 
Featuring the latest updates from your Practical Guidance account.      

• Employee Benefits & Executive Compensation Key Legal Developments Tracker (Current)
  Stay informed on new developments.
  • ERISA. DOL’s EBSA division clarifies and updates its cybersecurity guidance indicating that the guidance applies to all types of ERISA plans, including health and welfare plans. EBSA, Compliance Assistance Release No. 2024-01.
  • ERISA Litigation. An Intuit 401(k) plan participant alleges, in a putative class action, that Intuit used forfeited nonvested accounts to reduce its own matching contributions to its employee pension benefits plan, contravening the terms of the plan and violating its ERISA fiduciary obligations. Rodriguez v. Intuit Inc., 2024 U.S. Dist. LEXIS 143105 (N.D. Cal. Aug. 12, 2024).
  • Retirement Plans. IRS issues additional guidance on rules that apply to eligibility and vesting in qualified plans for long-term, part-time employees, including guidance on the application of Section 403(b)(12) to such employees under Section 403(b) plans. R.S. Notice 2024-73.
  • Retirement Plans. IRS issues its Priority Guidance Plan for 2024-2-25 which contains 231 guidance projects that are priorities for allocating Treasury and IRS resources during the 12-month period from July 1, 2024, through June 30, 2025. Of these projects, 17 have been released or published as of August 31, 2024. 2024-2025 Priority Guidance Plan. It includes guidance related to EPCRS, SECURE 2.0, electronic delivery rules, and more.
• Stay informed on SECURE 2.0 Act developments by using our SECURE 2.0 Act Guidance Tracker.
• Document alerts allow you to stay current on legal developments that affect your practice. Find out how to set up your document alerts.
• For Practical Guidance content on important recent trends, review easy-to-use Resource Kits on these emerging topics:
  • Chevron Reversal Impact Resource Kit
  • Environmental, Social, and Governance (ESG) Resource Kit
  • Environmental Protection Resource Kit
  • Public Interest, Pro Bono, and Non-Profit Resource Kit

• Generative Artificial Intelligence (AI) Resource Kit is a frequently updated collection of current Practical Guidance materials on generative AI, ChatGPT, and similar tools.
• The Fall 2024 Edition of The Practical Guidance Journal features guidance on the use of AI in employment decisions, AI considerations in acquisition agreements, Chevron deference reversal challenges in FDA rulemaking, 50 years of ERISA pension protection, plus obligations and risks related to the provision of anti-overdose medication in the workplace.
• Browse the Practical Guidance Author Center to see the 2000+ leading attorney authors contributing to our 26 practice areas. Interested in becoming a Practical Guidance author? Click here for details. Practical Guidance is committed to amplifying diverse voices of attorneys across all differences, including gender and race.
• Legal Developments provide the latest updates and analyses of emerging topics impacting your practice area. Visit the Legal Developments page to see the latest topics, which also include breaking legal news and related Practical Guidance content. 

• Discover New Practical Guidance Content and Resources
  Review this informative guide featuring some of the recent content additions to Practical Guidance, designed to help you find the tools and insights you need to work more efficiently and effectively.
• New and Updated Practical Guidance Content
  • Mental Health Parity and Addiction Equity Act Compliance for Employer Health Plans Current Awareness: Federal Courts Stay the DOL's New Retirement Security Rule Video
  • Current Awareness: Effect of the SEC's Regulation Best Interest on Rollover Recommendations Video
  • ERISA at 50: Pre-ERISA and the Need for Pension Protections Video
  • ERISA at 50: Fiduciary Protections Video
  • ERISA at 50: Impact of ERISA and Major Amendments Video
  • SECURE 2.0 Act Impact on Retirement Plan Compliance and Administration
  • Federal Agencies Release Final MHPAEA Regulations: Navigating the Key Changes
  • What the End of the Chevron Doctrine May Mean for ERISA’s Fiduciary Provisions
  • Heads California, Tails Carolina … Employer Considerations Following Wave of 401(k) Forfeiture Lawsuits

PRACTICAL GUIDANCE CUSTOMER EMAIL EDITION ON THE WEB

Experience results today with practical guidance, legal research, and data-driven insights—all in one place.

Experience Lexis+