Section 125 Cafeteria Plan Document Amendments Due 12/31/21

Section 125 Cafeteria Plan Document Amendments Due 12/31/21

In response to the COVID-19 pandemic, the IRS released guidance permitting additional flexibility for employer plan sponsors of Section 125 cafeteria plans. The guidance, released in Notice 2020-29 and Notice 2021-15, specified that if employers implemented any of the available changes, they were required to adopt a plan amendment to their Section 125 cafeteria plan documents.

In addition, the guidance gave plan sponsors until December 31st of the next calendar year following the year in which the change is effective to adopt these amendments. Generally, Section 125 plan document amendments are required to be formally adopted by the plan sponsor before they become effective. However, the IRS has clarified that amendments adopted in response to these notices can be adopted retroactively.

To do this, the plan must operate consistent with the terms of the amendment during the period beginning on the effective date of the amendment and ending on the date the amendment is adopted. The details of the options released in the IRS notices requiring a plan amendment to be adopted by December 31, 2021, are discussed in the article.

by Amanda Olimb

Assistant Vice President

Regulatory and Legislative Strategy