Cafeteria Plan Training Excerpts
IRS And DOL Audits
IRS Audits
Cafeteria Plan audits by the IRS are typically generated during a corporate tax audit, although Cafeteria Plans may be audited independently.
The IRS has indicated that if significant problems are discovered during an audit, additional employment taxes may be being assessed to the employer and there may also be income tax consequences to the employees.
The IRS may issue warnings if the problems found during an audit are considered minor.
Forms that the IRS may request during an audit include:
- The plan document and amendments for the Cafeteria Plan and the underlying benefit plans such as FSAs for unreimbursed medical and dependent care expenses
- Summary Plan Descriptions for the Cafeteria Plan and underlying benefit plans for benefit subject to ERISA
- Election forms
- Determinations of employee Cafeteria Plan and underlying benefit eligibility
- Nondiscrimination test results for the cafeteria plan and underlying benefit plans
- W-2 records for employees reflecting pre-tax reductions
- Claims register for FSA benefit;
- Annual claims denial report
- Plan bank account information;
- Copies of insurance policies
- Signed salary reduction agreements (though not a Section 125 requirement, however proof of annual election is required).
DOL Audits
The DOL may audit employee benefits for compliance with ERISA. The audit may be part of scheduled enforcement actions or as a result of participant complaints.
Potential DOL audit items include:
- Summary Plan Description
- Existence of a plan document
- Salary reduction agreements
- Corporate resolution establishing the plan
- Recent 5500 filings (if required)
- Major medical plan documents
- Supplemental plan documents (if any)
- Letters regarding approval of supplemental plans
- Employer booklets and letters
- Past several years insurance company billings
- If billings do not include participant SSN, then past several years' payroll records
- Past several years of claims records
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