WASHINGTON, D.C.--THE INTERNAL REVENUE SERVICE TODAY SAID THAT SO-CALLED REIMBURSEMENT, FLEXIBLE SPENDING AND SIMILAR ARRANGEMENTS WHICH PURPORT TO ALLOW EMPLOYEES TO PAY THEIR OUT-OF-POCKET MEDICAL, LEGAL, DEPENDENT CARE OR OTHER PERSO

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90-00530R000400780003-5
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 24
• Document Creation Date: December 22, 2016
• Document Release Date: October 4, 2012
• Sequence Number: 3
• Publication Date: February 10, 1984
• Content Type: OPEN SOURCE

STAT
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s? R.ws". 2-10-U
Internal Revenue Service
public Affairs Division
Washington, DC 20224
Mode Condo Tai (202) See-4024
Capes . T? (202) 5664064
IR-84-22
Washington. D.C.--The Internal Revenue Service today said
that so-called 'reimbursement.' 'flexible spending' and similar
arrangements which purport to allow employees to pay their
out-of-pocket medical, legal, dependent care or other personal
expenses with 'pre-tax dollars' are without substance and do
not reduce employees' taxable income.
Under these arrangements, employees submit proof of
expenses to their employer, who recharacterizes a portion of
the employees' otherwise agreed-upon salary as 'reimbursement"
for such expenses. On that basis the employer treats, and
advises employees to treat, the recharaeterized amount as a
tax-free payment and removes it from 'wages" for employment tax
purposes. There may be variations of this type of arrangement
which are equally invalid.
The IRS said that any 'reimbursement' under any such
arrangements is part of the employee's income under Internal
Revenue Code section 81 and is subject to federal income tax
withholding and federal employment taxes. The arrangements are
merely attempts to pay taxable compensation without compliance
with the federal tax laws. by labeling a portion of the
employee's salary as 'reimbursement'. In fact. no amount is
paid to reimburse the employee for expenses. The employee
simply receives what would have been received had no expenses
been incurred. Koreover. the employer does not actually bear
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the cost of the expenses. In addition, the employer is not at
risk as to either the amount of the employee's expenses or
whether the employee has any expenses. It makes no difference
if the 'reimbursement" amounts are paid directly to the
provider of the health care or other services or to the
employee.
Employers who make tax returns on the basis that these
types of arrangements are effective will be liable for payment
of employment taxes and income and employment tax withhclding
on the amount of any alleged 'reimbursement", as well as for
interest and applicable penalties.
Employees who file their federal income tax returns on such
a basis will be liable for additional tax, interest and
applicable penalties.
Code section 125 does not change these results. Under that
section no amount shall be included in the gross income of a
participant in a cafeteria plan solely because, under the plan,
the participant ^ay choose among the benefits of the plan".
However, section 125 does not exclude salary or amounts
expended to. or on behalf, of an employee if the amounts are
'reimbursements" under such arrangements.
The IRS concluded that today's arnouncement addresses only
the arrangements described. These arrangements and all invalid
vQ iations of such arrangements are to be distinguished from
valid cafeteria plans in which the employee can make a one-time
election before the beginning of the year between cash and
(MORE)
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eligibility for reimbursement of certain expenses for the year
up.to a stated amount. Under these plans. If the employee
elects reimbursement. but incurs such expenses during the year
in an amount less than the limitation. the employee receives no
further benefits or payments of any kind. The IRS believes
that there are numerous variations of all such
arrangements--valid and invalid--and it does not intend this
announcement to deal with or distinguish asong all such
variations. This announcement is not to be construed by
inference as approving other arrangements under relevant Code
sections.
x x x
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rederat Restetst / VOL M. No. 0 / Monday. May T. I MM I Proposed Ru3ea 12x'1
g.n. rv E KT OF mt TRLA,$URY
&.UWTW Rerenua $.M
I*QF*Part 1
to-0-711
Tai Trsatr+*nt N Gtatsria P
ast?rr. b%I ?!4 Rtveaw Se rvice
Tnaaury?
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Tedarat Itelistar I Vol. i. Na. M I Monday, May 7, 19" 1 Proposed Rda+
:o rulermaki" Wmmen? art mquested aperiTieally annostvmd b the -tSas of peeblic
arctrot IsoDc+ of p lid with respect tie the apptcatio,e Of tsesa ?bearU4 ceppeanna elsewhere to this
Rreeseastr This went sXSetaieea eacrimination standards b particular. federal teOOlat.
Proposed relations r,latirsj to the eta: pmments are requested rgardirtj Iasta Osaftiaj titoWaM
pieatmant of csfetv+a plans Q-an~cs to flat a plan twy use to determine r1as P pat aie6a d Gino
ilea applicable tax {tw were ter ide by dw t,rbetber it is nond,aer-mseTur of
_
Revenue Act of tL by the TodtNeal methods by which to value benstlt& ptoposed rWj
Gorrsctioes Ad of i9'9 and by Its appropriate safe Darbort five on Employes Mahe and Lnevipt
itdiacellansaw Revenue Act of 19W Tbt di-crireiaation and taste to assure that Organisations AvUtan of the twice of
proposed regulation would provide the St paiciag of benefits sender a esfatar'is tQuef Cosrs.&L internal Revsnese
blic with the r idance Seeded to plan is Sot &scz raiAator~ $srv ce Kowevrt, psrtotueel barn ether
pucomply pith those Act" rid would Tbt guidance provided by Haase e foss of the lnterriaa Rentz e Servke
tsd
affect employcu wbo participate in tuestions and gnawers may be relied and Treasury S3ep lat;on-. bot~ara
arsfeterta pitta spot to comply with provisiosss of b developpinj the refer
?attt. Written commsnt+ and requests esction 123 and evil be applied byy~ the matters d aubststnce and style.
ubLc bearing mull be delivered or Internal Revenue Service to resolvi tg W o. Subjects is U CF1 Parts 1.41-1-
fir s-a a ile pd by July I. 19i4 The rerulationa Ms4es arising under cafeteria plans and 1~
art generally proposed to be effective Waled Code sections Kowe r.
or plan years beginning after December pend.rtj the issuance of i'tr+a1 ve bcoeae taaes,Taxable income
for Is,,
exup! Wily, respect to certain Teruot ions, advance deter ination$ and
21. la &Mt DE.D)
provisions set forth in QLA-21 which rtiI rile rejord.rtj whe her, a cafeteria PART t-(
would be effective as September L be an is or is not d~w+minatary w'tv Wt pmposd adrwnL to tM
issued. dr'ertr,,inatiors rt{srding Re=ins o
1ia64 U -d with transitional ect to reL employer ei discrin iaat;on wiIl be e.6e only om
:-ded with reaudit Aceordiaily. It is proposed to amend
contributions male before lone 1. is". If fine! rerulsGons are more restrictive O+e Income Tax Rerulstiona ! C
pursuant to certain "flexible spendtq than the uadonu in this Nona. the Part 1. by addutj the foUowiry Sew
arrangements- that satisfy specified rwration will not be applied , trailed
tondations Also. the provision etlatitsj retroactively No inference. however. ~ttt-9 Qveatw~a a~ svu.srt rMtten9
to qualified cash or deferred a
arrangements would be off ective for ahou{d be drawn re$ard;nj issues toot Is esteurta htae-
d
Plat years bejinruttg after December 31, alp-MI) raised that may be suggeste 3 What does stetios 125 of the
by s particular question or answer at by btt.is mvide?
29 0 e Inclusion at iiClYtiOt of certain mel Revenue Code p
?oo Send comments and requests questions M nclus A-1 semen 123 providst that a
fora p puub blic bearing to (?ommlaaioner o tscvtive ceder participant in a oondascriminatory
Irtcrna' Revenue Attention CC:LJ4 T NonsppTicabtil!n of E cafeteria plan wit' not be tresfted as
( 15'74}. K'as~.inrton DC. 10224 S7T!'f laviry r,c.i~ved the uxablt benefits
Fpi rt.S-KER rail oawATrOr CO ( IC?' The Treasury Department has off tree, under the plan solely because
dete-tned that this Rer''ation is to, the participan'. has the opportunity
!ia-n. 1Se:rt of the Er plo)ee P &rs and
E.err.pt Or$arasat,ons D?vu,on O1f,u subtct to review under Latcut~ve Order before the benefits become currently
of the CI .e. Col'tsel U,tei al Revenue I229 or the Treasury and 0 'c1 of available to the participant to choo+e
foe-vice. 1,,t Constitution Avenue N'W'. Mar,aiemen' and S,,dgtt among the taxable and oonusable
ti-'ss! ,ng+or D C 20224 (Attentiot- imp',emeatation of the Order dated AprC benefits offered under the plan.
CC Er; (202-SE,6-a2z2} (cot a tOti-!r" y ltta??_ Q.i What is a -cafeteria plan- render
call 1. Rerulatory TZerdbMty Ad aeetiot 1W
S6-fLtNE1fta,lt'T ansoResaTSOet Alt},oujh the document is a notice of A-2 A -cafeteria plan' 4 a separate
wrtitten bencfo. plan maintau ed by at
2arlg'rouSd proposed rulemala.irg whia sa!rdts employ or got the benefit of its
The do,hmertt eonWna proposed pub* c comments the lateral Revsnne employers tender which at participants
Income Tax Rer.ila!ioru (26 CT"R Past 1) ~,ersice has concluded that the an employees and tech at participants has
ssdet section 125 of the lrateraa) etjvlsttons proposed herein are the pl es to select the panacular
Retienue Code of 1954 new proposed iatery-c,at.vt and that the notice and `enefas that he desire& A cafeteria plan
ttg4ta1;ons are to be issued pursuant to public proc-du:e requirements of 9 may offer participants the opportunity to
aectaon 134 of the Revenue Act of 1979 U S C 6.53 do not aptly Accord-rtg}y. w!eLt among v-riow taxable brr-sbta
(2 S, at 27t3) section 10t o'tt,e these proposed rer.p'ations do act and nontaxable benefits, butt tan
Technical Corrections Act of 19Tg (92 constitute r: lotions subject to the ?ri offer at least ants able ~tresltt
? sat tZan section era of the RerJsiory -etibility Act IS U.S.C. and at least or+e ecntatable bsntfit Per
St!su an Revenue Act of 1910 (tN ehaptsr ij imample, if participants are pven the
fiat :had and cthe authority Comments and Rrquests for a Pvbhc opportunity to elect enl) among two or
(i!A W Staal 917, section 1! Us.G r- 1of~Oil t>tic Code eLA" more nontaabf benefits. the plan is sot
Wore sdoptvy thesa Pro a cafeteria ptaw
e
what loll the wtittsa eteteria
P'a,rtsat eerulotions consideration will be gives Ian docutntst eoetaiSt
Thee proposed re lotions are M any written comments that an p
presented in the forth of questions sad submined (preferably seven copies) to Ace The written doeu t
answers The questions end aruwert do Or Commissioner of Internal Revenue. embodying a cafeteria plan must eaetatn
rs+at
of each ation. on. (i) A
Sot address vinous leaves regarding the M comments will be available for at least the following tnfo
glas
application of the dasuirnineti~oe p~ruetblic inspection and copy-nj A pebtk oprcirc esui ti w+1er the pled
standards under section 12S Wrtttas )bearing will be letd So a data benefits ovails,blia
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else I Vol. r. No. ? I Konday. Kay 7. 1W I hoposed Rules
wed" TZo0
fibs aaetiom an((c) ot tuts C O& R.ao ~ota~+ see al"." bateau may sc tsq asst be
endirss + erbett-u 8%91
de
l
b
hi
p
a
a
c
.ir
d ML
Lta pedw %% gads of iormu employ too nerally are tl;sata vided (i.e. e a tan may sot ataounu q"h tar at imchoiae~ troe-
f'u apt !an'e elid'biLti ~a $$ emptoyssa, a tat eteria p QaR-1~ a~ Q om
,rase} (til p be esteblist d predothLrAb ly far 1e ~ Gpf?thte thou" jam ooddeat or
vet patticil . e~ 1 1 neEat of tormu amptoyess of ttbe s+t/
xwdasa nov participants k leaitb pica, dtpendaat cstt taistance
tons ceder tde plan, b+cluding an asaplomam ac ~usliGsd f }deal
?iod durinn which eisctioas may be b addition. eves ~sou~ the ipe ye ue suss in s a wfetaria plan. Alsao.
de. the 61L rd W which electioru an sad other beneficiaries of pa Pa +aA-T r e cat{ the o Wdvsio
nods with tray Dot be participants b e cateterta We O &A-.7 t inbch&s b ?
.o:abla, sad the pa lam racy provide benebu to deferred wmpt
d to wbick ekcbons are affeetiva. NM a plat bras5c,arias of aaletetia gists
spe
the maul, is u made CI pa .. nefiu that are i!ete nontaxable bmay offer
dn. 'art,staa nd For ezampic, N spouse It eddit-on a uieterfa otsn araY as tn a'Lwcb as utioas .gay be la) d c n the a participant may Dot be psrmitttd to k
tw et th rparticiP art attributable to aft,-eau a
arnent bet the participant sad S. the it a not beeOts eel am-~ioyee contributions Tor example.
e employer or by moneleciupective orienlowered to select of purchase pieteria pion lass offer Participants the
ma %,jrt rt &mD.nt of to the oyer (~-) he plan but the Opportunity to pwtha-t, with alter?ta:
e m hilt ns & Mount employer yas be 16t by the p )? contribution;. ooverase under
a cats of a participant me) benefit froze employee
r cipa t 4er e p to any ppa~ ar awdent or hes?th pi" providing
rt,cipan wr+r the plan. and (ill the ih pcal inswarticipanta's anceeltcvaactior, of family be payment of disability benefits
rane orof
fo
an year alt wbicb the rafetsria plan ar-ed~ for
pcratea coverage under a dependent can Mrticip receipt of co ennne?s a under
a ova at strident at health plan wo
it drj,=SLr,& the benefits available assistanu prat am A participaat' uld
der r the e c fti a plan ppe-ast wiL' Dot be treated as actively sot trigger taxable loton~e because the
d no plan the
ibutioess
octi;r>,ent need d no be seL(.car fined part+c patirtj it a cafeteria plan merits coverage would co aced with
because the spoust has this right upon after-tax amp oy
c ed by ple rthe plan document may
dudt e by eterenu benefits the death of the participant, to select ~ ~ ~ en accident or
Faso various settlement options tats n er suc)t of accident
a 11 Writteapla under other 'separate d ~1e d durint the ysar of 4abditte
Witt re to
(**Cu" rittend 12G, row or lose! wider a a deaa raveiant nndar a selectedeby the par ctipant vnderbthee~t turn p
;uslif~e group ? fide epesnpleadent can Cafeteria plan or to elect among nay b stay be e nontaxable under section
a
am section 129). Permissible dist.-ibution options with WCOM
l-ta employer
ot ptoyat ets~eosttrSbutio t ty to the
made psunt to a
autut describing ( et to the deceased pariic`.pant'$ Q~ pp
-its escaattrplt. ncle the plan e the plans u ltspc is pl ma w LDt a
atsbl~abed under these other iarts W. bsncf~ ~ sn theusb~2se~cafetsrts Mary a an be
de? ant trrann part participant and staployer't
pen de kea ?s of (overace s;e uonder a t# ' What be efts may be ol'sred to A-I Yea. The term "employer
dependent ca e eesp en.) he 1 iil. the Q-2
Wdee to p+rb D+n a will tau I. be ? eafetar{a p t ry~yss++ aIl7 provide
a?c of pene!!u s-dv plat ~s a tpeat at sat
h s
relastiers of purer the oration its azCeptiott to *0
"V-4461 X41bt required to t to
t~ _?. ?r Offer a pCatructiva receipt rules rill rot ap917? lasso wse 1 b taxable slits that
o-7, 140 a cafftlKs pt h s dd i ct oa. a plan that allows ss it k&Ve elettsd to rece?.e 1111rs
beaa~,t tha that t jelsn Lb d e t+esipt r.u to lash ampierrer rdividual had the opportunity to elect
? a-pe't-++t c s mt i r c bu pa t,ons Tor Oft e plan rear to ive or ~yot to noire the b elect
A-7.Tlo A cafet that !e let does rot sac a benefit that will be provided to 10
> ode any plan that offers a benefit t dwp* both the oppertti0
th n?stio- a subrsquent plan year operates to P a l coon occurs and the emal
~t defers a rea;pt Of t ompe sable participant' to dalat the ,.chip ~e this
wade before the benefit'
with the a o mSof the oppor-unlb five camp enaativa bteoa'.e I. madly available to the
of
cipant$ ts t to der eltc:ove 04 What requiretr-tnts apply 10 ome m(l) 123 doer toot
oont a nc ur+dsr a Quattfied sass at nu' alectmi=x an des a Catetstit bowevet. ahsr the application x11114
to a situation
defanwd r~ed r+ant defused ar, r4ction M pnatructive 'the application
.r? net Thus employer eontribut iots? 4 A plan 2101 .0 uftteria PUB
nalits ce cowl cvr~nth
,_ *., t, be a
'
usl altarptan oon`au"r'a p+ slice ?nti make etet,ona among a ec
quri,red "9b or deferrte< are arnement bens! to o!!ered 1u+de' the plan A plant ield,vidua. e
V q
ide that elections ms) be made does not ar receive the benefit'
arili be trt?ted at sonutabk bensfiu lash) pro, Thus. tT taxable able benefits brcae+e
s-nder a cafeteria plan tan does pot at any time However, benefit ekcUOns p~aptla available to a participant Yo ?
ci add ? cafeteria a wi it der ? Cafeteria plan should be made sond.a:riminatory Cafeteria plan, dw udt t)ai en a plat, that opcrets it a Ps+anrlet ?ttordana with certain pure into micipaw will be taxable ern 1111
that enables ppe orson is Gtoedeltr the are Q&A151 -n order for pamic~panta to btnefdu. turn tboue>^ the 'hole -as
"tciPs nstati. a Cast for the protections of the aectioe-
plaip, Of Compe
plan that permits oipants to Carry ass cxuption to U. constructive toeeipt Motive Heelede a'r the ber,efionaQ uentl) a ocu sot to
u and does tact
aver anu-ed benefifits ts Of contributions
Will be dttvntd receive) receive the ndlita
from one plan year to a subsequet plan have een1aside if. slieroa participantta 0.10, rtC.*I is he can treatment atT
yaar operates to enable par D n nu m has elected and b I r to receivs a beM1Du offered 1rr+deT a d?cs+miaator7
defer the eaeetp! of tome Iathethtn the rhis benefit under the plan, the participant Ia pfeteri? plant
IS the Cast repa?d)css opf . bathe the rmitted to revoke tat electron wets tf
A_iQ The section i2S t:ce9lion to Ott
plan parmiu part,cipantr to e;onvert afro Clotbt re seottstNctive receipt Puler to not
ynustd contributions or benefits into vocation senates only that
on of U. benefit that has 501 yet available to the hag} l) compenacted
another . it the subsequent piss en pro-oded to the partie{pant For rttcipto Les Cafeteria Piet that to
year For e eitsam a plan n the, offs', atom a plan tan! perm Jt a d iP natorr fora plan, year Thus a
to p
k rrl:-at rt,apaat to revoke hs el
part ection rT higl+ly participant to a
ir,par.tt the e o ppo'tun c
c the plan is Get' of ~ttove'ape undo, pder. ? dependent ca learn' p,-n the! is d:a Pions for
the
.the p~ne~u uo dt t
_.r.rena ast,teanct ro-Fse^ or o! wvtra a ar+d4r ti h be ratable or..
- -.._..-. t plan year wit. . "Rt. with
be
plan if padays ants else purchase the rind of eo~eraje has coPS,n?~enC4d Will
vacation days to' a p.an year aft slot be a oaltiena plan' However, a
allowed Lc wt sty unused days is a aafete^a plan May pt-4tit s panic:pant
euh-r;lutni plan )to, This is tat+casrthe to rtiokt a benefit electsor aft,. the
even hood' the pan does no', pt. .loci of cc.era that comrtencsd and
pd ear to wrven er the ayswnt to make a new efectior, with respect to qubitq plan year the urtustd v?crGOr d drys mu the rernsinder of the penote of ccvesit
eataloha
.any other benefit to deter rung t the rt the rumpk. is
ender as scudeat w btatth plan to at employs, if the amounts are paid or covered by gels vents, for s phn
s~uuablfefteor Lbs sectioo 1O5(b) exduslot, bcurred under a dependent cart a paticipas+ cU go
the caria plan may not oper+te to a assistant program A propam trader year under a dependent cart suistant
enabin participants to Isica participants rt?cetw peoeas that provides for tae
a-ar-r-et that tr
?cbase contrast under the accident or raimbunements of dependent care trtimba,temrft1 of dependent sent
alth plan only for periods dwins expeeses "Ito a epedfied &mount and a~rtpeasea, only rtimburlsemants Ear
which the participants expect to meter scat entitled to rtuiva. It the fora of & AY dependent care expenKS tatow"d
me-6cal cart Far example ifs cafeteria ?tt+er taxable or non!aesble benefits, durir4 that plan year will be tt+eated as
plan permits participants to purchase envy portion of the specified amount not 4vir 4 bean provided under a
ooverale under or, accident or health used for rtimburseerent is to be treated dependent cart assistance proVere
ttlar. of a month-by-month at an as a mull, benefit that Is not a within the scope of section 12f For
axpense-by-expen,t basis, depended! care ass;atanct pro!*tm P%rposes of this rule. dependent care
reimbur-cmet is under the seeiden' or within the scope of section 122 T+tu? expcnus vaunt be treated to ba n$ been
health plan will not quality lot the . dependent Care assistants provided bcurred caber the dependent care is
?ect~or SOS'b, exclusion If. howevet, the under a cafetens piar. wtlr' be treated as provided. and not when the parttcpant
period of carerast under air accident at provided under a dependent care IS farrsally billed, darted tar at pay*
health plat cfTered in a cafeteria plan is assistance program only U. alter the the dependent cart. Also. for
twelve months car, to the cast of a partidpant has elected coverage Una*? Purposes of this ruk expenste that art
cafeteria p!ar'$ ins tlal plan year a! bast the p-og?:m and the period of con ,rise wed before the later of the date the
equal to the play, year) and the plan has cotrtrnenced. the participant does plowed is in e,,,istenu and the date the
does nw perati! a parvcipant to aeltet sot have the r 1ht to rtctrve amounts participant is enrolled in the program
specific amounts of covcratt, under the prog?am other that as Trill not be treated as havini been
rtimbu.'sement, or till) redu:tiot fort rte ambu: -erntnts for dependent can bcurstd during the period for wheel the
isss that twtivt months the cafeteria sxperat' This if the cast without rile;-ant is eo.ered by the program.
San wit be deemed not to operate to ,ega-d to whether ,overall under the -mriarly, if the dependent cart
snable participants to purchase pr?og?ars was purt?.esed wttb a,xsistar a prorarr' furnishes the
contrast only for periods dl.,r~nt vAieb convibutions made st the employer's dependent! care in kind (e undr an
medical cart w't be irncured See QOA- d,-crctior. s! the participant', a~ pleyer a+sin,ained child care facility).
S retard.?-4 the rrvsutior of elec+.:ons dis.crttiort. or punuan, toe eofltctvt qrJy dependent cart provided during the
41u."tr4 a psrrod of covt?sIt ot^ aceorsnt barlsia;rt a cement For exempla, tan year of covetase wit be trttted as
of ehar.srs in farrily s}anise ass..r're a cafeteria plar allows arinj been provided ttt+dtr as
Pith in order for reirrbur,emrr.U to a participants to elect to receive, for a dependent can videe!ance prop'am
b;thly carte ss!ed ind.vidual ur.dr. a particular plan year either the rijht to within the scope of teethe 13s-
atif-era . ed accIdent or health plat to rte nw -crr ergs of dependew cart dd;tiarti in order for dependent
of be treated as nor:!atsblt undera sxperues incurred during the year or to add add bents under a plan Sc
e!ens plan. the d,w rim;tution ruts $2." X or a cash benefit o ss If the mated as provided cafeteria afes a
Of aectsor hall,, must be satisfied rot participant elects the rier, to naive depeendtnt cart assislanc* ide tr program
r,,rgeses of these toles t?overa a under rerrrb..rttmers.e el depceden! cart s;bld for the section 221 ttcrom the
a sell-ins,ytd scciden! at healtth plan stptn-ts.19+e rrer-.b..rses;ents will not le t ao! o"Mo to a eaanntt that
?ffertd by a cafeteria plat will be be tica'ted as made under a dependent plan enables may icip ra% i t MA
orated at are op!ions' ber,tf,t (even If tare sss'alan.e pr rent U. stet. the tonnage under the ptputi use fns
only one level and'type of coverage is period of aestte as commerittd. the dairy wheels the le atilpaats
offered) and, for purposes of the participant has & ntht to revoke his tt'e't receive dependent care
options', benefit rule in 11106- - election of this bentfrt and instead to sxpec note c the eriod e t C tntt
f,oteret
11(cN3)fi) employer contributions wt receive the cash or, tf, under the tsars od a .,s st a ce ene p card of
be treated ac empioy~ee cantrbuUons to the p. am tttelf, the participant is p rate *flared by a gfeteria Plan Is obdednt al
the extent that taxable benefits are sat;tlyd to receive. Lim t}+e form of cast Mr oofnihe by the case of a
?tertd by the plan In addition, the (e.g.. routine payment of salary) or any twill tan', w, Lis plan Wu. at nett
tel and the p~
accident orbealth plan offered by the other benefit any a nounts not ual to ~e pleat y
cafeter:. plan eras, provide for Oe Rimbursed for dependtnt cart proYided es not ptrpla s pari .n a>,t to selisd
awed tern: r story m;mburseressl sr der the period of wveraste. Lisa amounU Of o~era
srzper.-es of a per capita basia.retaat Araryernenta formally outside oft e $ cob nt of salary rtductiaet br
than as a proportion of co*npensatiom cafeteria plan that provide for tai rite than Ole t ial z tkt plan to
Q-I$ How are the specific rtilet d sdiustrsent of a participant', net to elan Will
saector 229 providing an Wocaeee compensation or a participant', rtvlpt be decmtd not is ape
Ow ants !o purcl+a,e eovtnte ee17'
sfiselus;or. la dependent cart assistant sf any other benefits tan the basis of pods duvets cahoots drpen t cart
pro ided can der a dependent asst osaislanu se reimburserneF'ita r:utvtd gee
ass stantt program. to be apptiad wles by the participant will be con his aria assistance will be SeetQe l
severest under a dependsrst art determining whether s dope
Declassified in Part - Sanitized Copy Approved for Release 2012/10/04: CIA-RDP90-0053OR000400780003-5
 Declassified in Part - Sanitized Copy Approved for Release 2012/10/04 CIA-RDP90-0053OR000400780003-5
jjr.daral R. sWt I VOL I!. No. !s2 I Monday. Deeeatbv $1. %W I Proposed pulses am
-. OGaj (fit) (oot a
tleC ?bse ataD} '
~.taeort sneer blrusenat?tnttee
AttttwCr. btarnal Revenue Sarvtoe.
Treasury.
sttrote,kmendment of aobtae of
proposed ruleiraki,ty
"kx rr. This document c to lns
propcstd sroendmet t.s to a sodas of
7U dot wo1ttsl proposed
shoendmenti to the tonneof proposed
rultinaLr4 under arstios W of the
Into rnaT Rt.eras Code ad1 4 On Mai
1.1061 ti" Tedrzl L...tr published
ropeear trytatioa.relatind to the to
t eatmer of Wet" plane (N fR
3tfSS'1) The retulat$ons b+ this document
ass bore) proposed it order to replace
portivas of those earlier prtpoeed
sett:lstioaI wbJcc have bean trtde,ed
a~baolete by wboo 13l (b)($) of the Tai
Reform Act of 1961 (ell Stat 04). The
propcred regulations are Woad evader
the autaorirT wntattstd it section 7l05
of the Interns! Revmoe Code of 1554
Oo ftb-uary 141961. the 1at.rtaal
Revenue Service Issued a news release
(flt Z2 which stated that so-called
'Otxlble apendnj as+ansementa' do sot
Tag Tmatmon! of C.'ite+ia Rana pprtoovide empllcyere with nontaxable
(Tr-^sttio{, R,~ietk -iotloe of hopoa~ benefits under the Cod. because, under
Ru4MA" . h arr"tments, employers ate
16 CFR PaA 1
([t? ts-7il
hntw*u! Rarsnus Swvba (baA Stat W. IS U.S.C 7105)?
(FL1i`794 W'a,Tunjton C. W=4
Fos "r?t a wroRwar-C;s., Cot TACT:
Harry &1er of the Employee Pane and
Laempt OreenLsattons Dfvietorr Weis
of the Mel Counsel, tnterr al Rever s
$srvica. 1111 Constitutton Avenue,
N.W. Wasb.ir as DG LZM
g
r.
p?opoted rw.mal.+tj w>".ich WAD afectve for CJ!.teria plat rears
ub!;sitd tr the Frda-a. Re=?star oD bt nr' aher De:.tmber t1.. 1tr?l
May 7, 1961 (4B M 193:7) That ooUoe H .eve e as to particular rules in the
Ge en' Of u',ete d Plana pro ~oscd rte 'a' ors a cafeteria plan
b the to <
oou,d be amended by Septeatb. L list
C?:s:,ies to the app:: ble tax taw to meet thcue pert ta_r rtes and thus
acuteits';ry Lhhe prv ce atrendmcnta the requ;.itments of the proposed
Wert trade b? cecticr S311b)(S) of the R `anions Lr addition- as to benefits
Tax Re!a-m Act of 704 The froposad pror;ded under a flexible sporneli-4
tmc~d :,art, relate is rnera: and
a,rrarStmcnt r.!utJa was part of a
specie tart uor relic under the r
pro~-td re rJs';o^s and provide the ~'t't'u p lam tf wch serar ement woe
public w^th the p~ dance tsetdod to ape:i.,eb wnditona the hart!;'s
tended by employ it con,nbjhons made
cam; ?y with that A" Mort June 1, 19N, qualii5ed for the
oarL W'ri'tes Comments and requests stetuta-y exclusion Do' i' t?stand.rtj that
for a public hearir4 rt:us, tie deLvered of a cat'-, out of unused oartribut,nne was
i,siltd by jarua') 3 19t.S T'Ttse available at the end of the plat year
propo-ed reg,latior.s are jenarally to be
sfFective for play, yeast bet.ninj after Geaarsl Ru1aa
IIturnber 31 i t bu' art sublrct to the The Tax Reform Act of 1it34 renders
genera! and special trans;tioe rules. Q&A-3:'i obsolete and provides both
*oparii Send come-ents and reyueatt Rrneral and special transition relief from
for a public be.rv4 to Cc.rr st;onrr of atrtait of the r es tr the proposed
bterra? Rr.enut. Attent:-?o a?LR.T sm!abots for ttrtatr, cafeteria plans
aatu:ld artcsivu, tat benefit of .rent
&a) Would Lave received had ao
oovared trperses been lscve++d
Oe May 7. 194. proposed retulatioca
in QunUor and answer form were
rubutbed it the lades! R.=tstr Q
enerally to be
iat,o:J tolm
e!
and flexible a;wn&fts arrartjements
}"fret, as to plans arid arrtr gements
wr~ucf wtr' to exlsteoa Do or before
February it 19N (or for wbJch
substantial Implementation costs bad
been Inc .rend before such date; and
which filed on or be fort Luca date sad
Declassified in Part - Sanitized Copy Approved for Release 2012/10/04: CIA-RDP90-0053OR000400780003-5
 Declassified in Part - Sanitized Copy Approved for Release 2012/10/04: CIA-RDP90-00530R000400780003-5
Taddv glee" I VOL a No, st / mosday. Docsmbar t1L Meal / ho'Paad
;emu
to as do T i atsrhAm7 r0Qftkmmb ... . - .as/ &&Vmet ter a Ptak
rogwatiots. 11oeral Ir'oalts?' '.6.`'.d r Qa~-ta
.d prvrtd.d esettl jaa+aar7 L tbs. !1s tbtarroat trueness !~?iao W %r an &t~( Gjas P
d the t the Flaw W W s a~eetir da twmha.d bo w"w ? d t po3dpasm hula lSooa. coca t_sti lfm =Own
;rc cot mods.d altae Tet rti+a 7 141K b pka. a bwwtu tlbat.rert sodilwi r nay wrt'Kr oomaagoO that we
. aMw sddttionai Imeersta. sane T.brti-w I& %$K W tbst th r rasbmfttad jprdsr-bt;
and a. b Se adbls "pen bxaer 4St b se t4s l} ons or e. on 60 the coatm%' d ma or to tarsal asYrna
sesmeats wtL~d "ILI) te, irWO aal" to the proPowd miru! &dom sIsmW AD =m mts, wM be arub.bb Mar
Pena i d c a "Puri tbrvu# Vet* mbwr !L not be di sa a'~ a~tateQ bw ue. sf ere& p~oobik tae p*cZm u d oap~'taa A rob&
,a& coda wtaid+ m emptaye~e ^ge 22 mrJorm;r4 a~odl5c~ liana h .rdac b M will be 1ek aped request b tbm
be aa+ouart of aeotrtbets" befors an it aoj .dtierse sheet u~oc sae. Go:o~faatoesw b7 $07 pence Wbe be.
,xsinnitst of the period of aarerW Pail ~~r4cipamta the loth al Rsvanar wabeaStt.d wrfttao comments. T s pebbc
,ndsr woic mumd oootrtbuboea lerYia as detsrm;Zed it Rtot awd bewrtrts Is belt sotSoe of the Um mad
Taatlceel
jtnerslly we sot s?iDsble to the p'tau and benefts r%Larf uade:.er3lao taoe wC be prbtisb.d t, the
amptayee before MY L I"& ,pedal nos(b) of tbt tatemal Rrveow God.
trstutt;at mbe! is sratLb4e antQ 1* L Q&A-.a A id', the ri1 Ds'e t ttafor~.tim
1W . pprovided else to are tso La e s t cd it QLA-t ge naraB y do tact ,~ other of these
Sodibutiwi after Droembe j%, UOL brooms e'frctivs with reapart to cd
rdp s
cos V Kerry Bokser of
wb,ab allow for sddttioma! bo costa plans a bene!u uatC joas.ary' LOW p1e'?p? i s ti
the Taptoy.t !'tans am Tacareapt
fwclioe 7xsd bj Rabat Tar Ameod.d aesd Pa..Sc;anI b the ice` d aaCtim Q1aa:zatioetia D~rtaioe of the office at
&q ~ "Seas tai T3eatsta ttasrbj Petri.. Also or benefit that Ism if coumml tatertaal Revim"
Se?ctioo sn(bj'(S)(A) of the Tu Reroute beet model'e`d alter Te}x~ary B4 Bt~K gar4m Hovrsvle, pernonaed bvu e+l'bat
Act tip t ;e?s, e"JJ trine l ti m relief Outy ao that I t lap looser f e 'Ls to a. tin fJ ant at eram of the tot arm ai Rt? eo oe Sera-tao
to cafeter tans and ben lei wort of the n.lee Le the propo..d sad Treas.ar7 t3cpartmetat partld;Wt.d
(incJud'r~ b.nc!fu thst ere provided tes~Ia ions may be te.rtber modlbed a:d b devetopLn the Per oboat, both os
f ro? o fierdble .pendits ar ar~ease'nb) oootnut t8 operstSot ur+tO Drecembex.ll. marten of a tans and 1t71a.
hat failed cc of before Tebr v7 B4 t*4. but only andrt the tame terms that Lba Of Subietts 1! ! t31 IM-1-LM-4
ttia4. and -continued to fat; !b"leeps" appted isnmcd.ttsay baron the
to sst s the rote, 1z the prvpoo.d corJorrolria mo&liuto6 Howsroi. Itacaame tai.es.Twbie lsooees-
te:ul a ti ant to ad dl roil per-aral beca sae o w.1 ea odl ed p tans oe be 1& ~*~ Aa.edrsi?ta b da
p-ans'tior+ retet is avattabble only onto do not queWy for jeneral VWultioa WOW~
"~
VA. affective date. alter Tebrua y tO Witt Lhrou Dec.eaber ri tIM ape.dal or amesdmacb b CPR
39
. -of nay modl6uboo to prDri~d6 j at Will is no avaleble to .ud The proyc+ar
&bona! besides ? Part I we as tot3oww
A plan ca benefit tots has beet' to sdditio+t pu,-"seat to the cart or ft-is is+ph t OLA-11 d prvpa..d
s-cd;r.ed rb) amend,T,eo or olle rei.el a.e b.i-bad to the Fed"
coa T1CSt'*v; rel:ri. orrt?is RLs! ` I Ia-i .a pv R~See at May 7, 104 (4J FS ttZ3-
e fte' rrbrtiar It, 104 se that the plain ova0able, as Ws fcool b QLA-U. tar
tID9; u r.mo*ad.
Gar benefi' De iorutr eont:nues 1e` %11 erne cafe Ewa p'a--ae ee bsne}.ima
d,csa,'bed it QaA-!1 La prv+'tded to salary red,actloti Wremebta) w Wad foe desiF the Platt am ant
bezents pars?. a w of prwi de be be It is tleohd hbj, t man to b oa t~os is for "at purpos
an prvnde-d d lSc (iodu CX t t sp is shat older the P" is order for assts In be treated as
Wo o.isrt
an pr
aeatsl t the sar (7,1 wire L., rs.ist ercra A earetsr{a Plat '41, was not aCt'wady yaplcmebtatiot+ cost w?1tb nrpett to s
n 18. ia- and (Lt) b eisteace of at Lefore fsb.^uary Si4 utetarta play the ooato eat
a o fore Fz"It ink srvartbt eu w1T be tmsitd as to spedfirjtll LUmable to suck plea
l;fy for gene traprboa row R>ds'anae o or before such daT
an If the
an ~L Dc .t fat the rru1le 4M for Set u,~ t sal As a res u1 L bslort f sb n+ar'y it 1W an
d-rdd Q~A -S` for s'pkysY Lncr.rrs~d "wlistas employe. must bare totrsded at
dte- .-r,; wbetbet a cAfe;sria as toe impternes!ataoa oasts- srtk R ptabLfb the pa.r4cvlar Plan. ar+d the
and
PL!4jcw,.A: :?- Sse QLAU Ice asosta to q?eatiot sus be dirvdJy
o"
a , at -t csuftetae on at 1f essaaaia of the rwa appL;Jblt to the rotated to Lba, pts:n. Ar, employer's
>Eebp,.&'7 It. drat 'emertaticrt mat'
A. bin! atabty! s
s art cafeteria Plan WO
f;ti t>;e s, a-a; aeD' 'bubr a^-L -mA
C pay ber,c. a sm as e~d+iL dc:errassDaa be tvide?aed oe`y If the drs4r
~. t s utyar-s e ia2 bavt beta
are t oa dertie-+den' uK ass':atanca. that ~f? a oD o-X be tnaiod W is
? belom F are 1t1 19K vetoped as~d steedpLpon Dv February'
are vada' to tog th
aar+der the appt,u5l.atilt y as Of the Lbt tide sri~j of os or before ovc}: day (t) the it. 1*4 In ed&uor, costs
r ` e ra w+tlt not be
rsier of Cads l et that
C.erwtrat;y. u,--der the Eta, ' t sper?d.d wer E! was tw* of s cae P ocitc.&ly allocable to s plan if the
a.r+ar-4ezrtw to^m of a a b.aet a was it tx. ate the oo at Wort Feb>rwary costs would have beet tncurrsd by the
pa-t,-:ps.n! Lf ass"rtd of reca-v'ds b VG 19K rte; the berwl~l was ttitly aerpi o>e. aiL,out R1and to wht.,r the
~~s'bsd it wr;tter form MM
asnount- tbs` are plat. It put-tioc was estsbl;f~ed for
eesalairaryb_ mcatfbttenor+ db0ze u.A^ Vvaorbs' tam ayaenplt, the ass! was am
~abk fn azpersse oc+*ssuatutsd' Lt empto} reel b P96 the period of lacrt (e $ as a.^t of the eumrsary Pte' ~s+srP4 a oo.atpvtar prote,-s WAL be
moverajt without retard to wbethet the desc6p'von at par brocburtl. sad (Lai) mated as are La pkmer.tatiDC Dos! be
parucipW Lncust covered esper+sars amounts west oo~r:tributed with re,POO Ka t a pert~njsl irpleme plan only with
dtht Krtaid to the benefo wtd,et the plan A beastit proflled for s tap -Specifically def;3 U by
urutt flan as ;denodd
P1ar.t or plans temt'e an serf #W, w ar no, anus C. is . ex;Wrba L, hol et on of {,aatioa- devslop+d by
of morn red
t;atststia pleane beuust of r a a tallLrs to forget February 10. t9bt f not sir~sr Insta.s ttbrvary ae s'
F it 196t y{or?e+e7. an
K'ba! rout apply b+ dcts*mintttj p, spru
er-tS-ty ors of the rutty fetert ,ed a,,~c24 tmr+utaoR
4or srtl' be to-tattd uttcrta artlme
` r n.6
*tarta adlety fo< pLrpo-es of f the whe ?~t.sr ar ev+play r doe lneurrtd pofta Wilk naps tr ? P
'renaaiat rete ae! forth tai Q&A-21 -vubstant,al t tee+eatation oasts' ee'lth ~tsteplleoyrtar thyeat s e iecHo el serf irnbeaptksum cow"
Srouo v d. QaA-n rot txetssp:. ? muOVVQO A-24 sMpeci to tfete pt n that errs set as t>rptca-cntatioa cots .r1tl Riper to
pr
afle .nt spWJy ending s med,eat befit s +aD) to t=Jstence ors at beftm as-otAes Plan that bad oat actual,) been
a to!ed as a t pfte(tab 61% desired w ea etic~ wets we"
ae as 0 plan ft> P-70"* Ttrt,rs--7 it, %w, w{L be trcsttd as It
~` It am to s- tncvrred Oubs'
of tht trsaIUet relief oey Also. a prtas SLictCDae Ira a before tad day caty It
wtvv sander Whki a pon beet spay lelse ack of t . t mtrtatioo coots with reap to Meta with respect to two catetrKa
asoorlj two tro or swore brta. lack k d
Declassified in Part - Sanitized Copy Approved for Release 2012/10/04: CIA-RDP90-0053OR000400780003-5
 Declassified in Part -Sanitized Copy Approved for Release 2012/10/04: CIA-RDP90-0053OR000400780003-5
11077 Tadsr* RaSjstrr / Vol a& No, !i2 / Monday, D.eamberr 1R. t / pmposed Rttlwe
lad bona ,tiff wand awe be sva&bk tttrth -ploy*ee wr,Go wor>!d not etbe?w%t
'kna. troth of . r h i c b eQ and &$rood+pem nopw to the W W I etreeflt We baoems slidlbls to partic ato !w
fo( I ltd after Tsbr+.ary 10. UK @a as pvt&D wC be treated as a
cat Cot yytati If as of tha tint awl
eoou warts incurred. and these Coats am swapro7err modif~a t flexJble spttttdiq ttawdiliutiot 1a Provide 6MISOMAI
pesilic4Ily atlocabla b'" t!e serangemost under a cafeteria plan to baaaflt However, the adtditias
sofa
plans. the eta are to be aaoratad se ' 1rv+~ide tmployet* with additlott-al idividuaL r ~a6O' v ~ tin
the basis Of the fumba of perucipatts rrt+tt eucl modifiutiot would be a psdpa floe rda m -
to the two plans For t'ampla, by tt-od:f cation to ova btnefxt to provide sdi~bthty and pwoddpa
February %& Ina aD employer iAC++r*ad sa additional ben.! L T JDptas of affect on Tebr+-ary 10.111K will act be
j10.000 or the do s',c+ oft pu tat additional wish u arm the rt jh t to tlxak a lea led u a modes ei tioe~ to pevrkda as
prv~arnt for the administration of two adlitional cots rebut oDi, WAS moss additional bmdlt.
cafeteria t1LL* 41W% A and Plan I-- brqusnt char4te In the amotiast of tiatr ~~
mach of whic. had been apac't caly stootributSotsa. re-,.atve relmburssmaats lit *rQ1 be treated v
ds*ipned as of such del se"use Flan A Joe sapasaes for whirl reimbu.-se.saeats A babe
wil corer 2S percent of the employer's previously Sad not been available. Oa.-mizsted it the plan Is amesdad 10
esrorkforu and P,ao 3 will cover n s,calve taxable cub under the atiaansta the benefit and tba
perunt of the workforce. 2,-M of the arrangement more frequently thin had amendment Lae taken effect The rdee
S1C.DX is allocable to Par A "d r.It00 been permittei and receive new or delineated is QLA-V will became
is allocable to Plan 10. di!ereet tr** tmtDt of amounts that were affective with respect to the beDeht that
Q-:s What ret,ef, is pro,.idtd andw a*a!lable but usued for supeus his beet tarmitated oc the effective
the general transition Hilt? tsimbW-umenta (o S., a cast-out is lien data of the termination However. a
A-2S In the use of a cafeteris plan or of of it sdd.:tiot ~o a urryow} benefit provided thrvugL a flexible
a benefit in a cafeteria plan that s;mllarly, It tither eontribueoas err bn f arTardemeat will be treated as
qualifier for general tranottioc relief. the Rlmbw-*ementa or both] With respe-0 to suspended. ruttier than tsrmtasto& tl (I)
general effective dates in QLA-Z do a bemefSt provided tLrougb a flexible list employer communicated to
slot app's wilt: respect to the rules spendiry a.: aaaerneet were suspended employees that niftier eorcibutioao or
apsufied it Q&A-27. It lieu of the reac5vot r4 contributions or roimbwmemenu (at both) with tt*psct to
othc he applicable general of{ective reimburstmenu (eves under the same ement were bating tuspou"
date, t tat effective date with respect to is rma that applied immedistal before but m4bi be pcrm!ned it the futu t. OW
the appliutioc of a pallor far not to a {he suspeesion) will be treatedaa a Cal amounts under the wTarsge0MZt
vat2 b YM*
carriene plan or a tic cafeteria ss-odificabon to provide adidttiawal were not made a ale to er Pto
Plat ~efS it e
plat under the ``snore/ tran*itiots rule le b"flts luring the period of suspecaiaD for
tth+e earliest of the foL'cwing dates (I) ? A moditicaboo that fan or moss othv that the rperiul %twnt of
Lnuary 1,1,6.5 (ii) the efftctva data beaeftt to ootsform to ~t genet sad speared az a veer, rsntrse Dud amoaats
pV elf a ia' trar.sibor, Hues will tot be
spec were otherwise available under the
errafter February It
be0l it;on to the to proviar plan Of meted as a MC-1-?iuLoe to provide tarma or the wTangemet! km affW
neft tthor. to ptM *? c addition bone is for t=aa,ple, an td.istel before >t suspea*ittra
edl ores' bcnef,t liUi t a :!!ttivt data exrtecsiot. from December it, '04L until y
o! the ttrmr ntt,on eLrt~netioc of tbs jaeua.-y 16.1465. o! the cut of date by Corroarriartg MadrfsaoLiam
particular pear, or btnrfi+ is gjrsbac. wbici ex.pt?.se re;sbu.-+cmrnt elaimr A mad fi atsots (by amerodmsDt or
and (rv the e!ftctJvt date afvr m,a, -.: tubmi7td under a lkxdbie rwi-e that becomct effective a!'esr
f.utioc to t to, e~ tae ft} e
1C .D8{ o.
Ftb-uary r a mad. spend.~y arTangrmen Febn+ary it, i4bt and auasa a
the paricular plan or benefit it que*tsoo iec,..Ttd during the period trod~rsg on -terra pt at V s benefit aiadudireg e
tbat c*t such plan or benefit Do Dturrber t1. ltibt will Dot be a a flestbk
rule to f fG*CTDto sacs!? the p*rtie++iv sm 'rod,ib!`r~t _at~on to provide set sdditlo~Dat benns!i ! provided e tLmeot)rovgh DO bnger to fail
raft it quts:ion ("eonlot'm21i be3nrf4t. S;ai'Srly at -iteraGor~ s it a d S'"
n ,r arrayteroen 1o satia!`y ore or more at the rules m~
* ~
Mad;/,cot;oru to Prpridt Add;tjortal rind of eove:*je scheduled to and oo QaA-1 throw Q wit, be tr*
mo~dil :Atiot,' that mats
-)rfA* February M 1964,
T sdditton of a new wtL and at L3ecembar It ? tief for the
w benefit toe ti, 1W and a rev, period wt rear from .G sera Goo rtC%JAj nut of rules it f f r thee. nosh
otujlf I
c,afeer+s p`.ar. will not be treated as a ja. uary i. 14aS thuo ur.t 1t+ Ins. rule Of nuts will become a!ftctiv- with
befit
wod,rrtatiDD to provide at addition urtt! Dot be a mod f,utioc to pror'ide as r, to the articul-~ ptan or
of Februa It 12M, It wU s-ddhoos2 bebtfll the etfc he p dart of tar corformlag
the a s l as rf A mWicatior. Or g sbn+ary st th4 ?le t e date of . nowtth-taDd+ag
the smpeycr's tittenticn as tvidcDOed IIM to a tar, or benefit that assts the
It writing and corrrr+uniuted to lac or bepnePt to fall one of more of the *a! a ooeform.-r~g modili s i haateta
more
made with respect to Oct
smptoye that the bcntalt betoase ? Rtes to the re t*tlons generally w~ be
efiect,ike u gate of plan as of the ruler to Q6.A-1 tLrovjb QtA-~ general
part,cutar date of a6d,tio?Tat essas~14, !tared as tat provision of an add.Goaal ruler iioo retiaf rematas aeaIlrbk r
if by February' 10. iI. tam trmp%oyaz lad lbenetL For example, If a ned-uu Ia ~pcular pram or l yL with
announced to eroploitea. in writing that berceftt wtuch satisfies the app seep to the epla at rues wbkl hatre bmebt.
a rec. aed;cal benefit would became rules it sectioaa 106 sad 101 and be bees so e ri isad lets bl kts
3 4. e to p6tiot parts as Novtmbat L K
rVj`Ul?tiOMA to converted oo May act t best ions tndudt Coonform edrDesb seo at D ci *dd,Goo of the medial beraefkt wm~r~~ID nt sash wnvtr lot, be a that br'trtg a play at bbeTie fit to the t~sia
bm scats day wollnot be treated a a Nodilt *tiom to provide as addJbaraal eOttSormlt7 with act or more
en0tte. al; However, a pver, if rovide the pew a+e WW o rddleal tersest `QLA-1 through QLA41t sad
neft cottrib benefit was not actually Ia exclsteors e A modiR a em. altar T*bmwy A etiap swpetana;ons *em of jh QL eato (or utiboth}owras or
it! rssp+a 10
February 10.1fi6t general traasltiss ML to permit parts p+
Declassified in Part - Sanitized Copy Approved for Release 2012/10/04: CIA-RDP90-0053OR000400780003-5
 ? Declassified in Part - Sanitized Copy Approved for Release 2012/10/04: CIA-RDP90-0053OR000400780003-5
~ 't / Vol 4L Ne> !S2 I UWA Y. DqsaambW E =4 / P upon. Ag1.i WE
be" M as drwwbnsd tmdrr tear tt~+l
~rset! b pr 'd _ beams Q~b?i? ~a Air wNct ^ lu to na" In isnd-aj crnajr~ti The Soaow aikEKa pia, Fwas `ee Itfo4 Wfesittaatlsaaa ~
&A s1
)fart we Q+A-a for tsrtab wb to saes. traarbtas in to eeli'divt &W seder the POWW
MW that is Prt~ to VEM or "an rwq~diat &a t ap'Cbteadot ma tles teed riot r d a pima may permit as
bwwsb with rttpect is sr#4ti be kcLwdmd b dw srr{ttea Debt 4& }W ollse k as J QYW- tataaed taottab
ooesfo mbba canvas be go been d='meat (QAA-4T M 9W m of S doss davwwje or a pima 7W
J0104111. sr~aa the atxf in peatici ~yr .risber i1. UK to a parSod of
Q4 L WUW b 6d! Csoal mail b ttP r s tpvaac Is a as ft t r w -tas 4Dti rzM cc Pus l'w beet s?-
S,?atlabk to cdeir is plant or b'r,I 6b -A-4t (W; the rake aa.ereir* 1bs jams L itttt5, *Itboa+ taiL.ca OW r+itlt
week resprQ to wbid oonfofwft ,rmstim teat moat be tndudW to pZ s Wetsria plan 6vs
icrdifac.aaot+s bare brim PAW writtec plan doctiedMt Will reaped 10 -trptrstkta b a ataane to parmlt
b b the wa+ of a plan or beery "tan rsdusetioS IQLNA (bCe ilse partadpaau s dater the r+KS+p~t at
at t tai bees MO W$& allsr Febrsary taplo at w-ili be Other bment the sma:au available for
but only under t~t t ssama e tams that s 'pt rJ
rmrr~e~ci,itc?p befire the - tat abie at tarsble be-of 5ti.: W Rla. &A;c~es' iii
applied a-rd ri~+'m
saonf >r- nt tires. F of tom. aTapir. ptber com.~c,~eCon the be has t ac trsaltr p&r of aovar.rs (QLA-17
ra 0&!",a
?,, a hat eWt:tvt WC i. 1116& a ?ee:: VI-d or tae` bar br:.at'. CA-14 l7 d=+tajk-1;~ ra-l it o+d+et to 4 fi, be
t
Se x'b? c t ice" d.: 4 errs''4 t z eat srt s av al:a cal a (Ls dey.rt be d it Q ZJ1! l aid at - Q'c bm 1 tb'b) 1 L a T !9 t >t daatoes
wri th oar' rem a-d to the r* proestl w taw tat
rz.ks tb o the fma the Medical
anoil,r,ed br p'is a5n ant to ProritSt poc ; s?et
she'. erne its a>,ailabie to, medics ba'i air-sDt, &pe~dra: tiara, yr ktr: exPeass
sap,o)ca j ar n'z+e~,
ml CW'L
reimD~?sc ! rend M;Dnvr IN
eve!.b?c to the imp?c)et trrttbver akcU mot to tsa*~?e aril acc Ry doss de ?e 3 _ eW 016"t e_at be ,Cfx art~too6umd
srjs-d tc Ahet.}er t.,e er,ployet incvrrsd sot rxe!vc rx3 cosh?r be~t~ta Fttr . d7. d the ad foe a?ud tit
} rs Lmf It. as employ" La a titxdbte .ruj Perri
0 td,ut care d,-rini L t period of tn under rv6tata ~art,c:pant 4 oetua`J) Covered by ON
C,0-4tA-anmi.nj the' gock , ~' - tfleft tt&-1r mad Q&A+-14 (t )
amendrncnt is a ao^!6`; 3 &'.LL:at rasa ie remi't-+'sboa
drs~ot the speedir4 ac*~+:1 rest:v rd is rttii;a mete, sad u a medscal care, dependent oast. mail tti1
eho
? rr a rst rr, e n ! me) be }vr'~,er tae od-!r ~}amc be c e.i.e b i et owed r aw c?.a r ad r irc We am verb t th p antic i pee t a4 'taeur+sd
cont;nac tt pe-abon threw Dee am0urst Hcwe.et. for p? m at ie care O} Gkt Si. es Kse to the oorswd
p]. etil5d ender the aunt terms that
app".,ed ;$,raed:stel) before tike `enera' G-aasttioe ids that t 12i sate D - ra is ag when 6110
ide
tluptiao M W ~rb ci tat . krssi y blued s
oonfortninj mode r mcid l0 pt ill prnotobe trine as 16A V1141 hc, or pate toy the care tQ~-lr mad
t3euu-e rare), s odA d plat or ~ QL5-1t) ar4 (v) in made for medical
benefi' does net Qushil) tot rensr'1 oors-bvct"cl) r",Vre a t"bia
be me 5 ! (Lc, c) vd.M CA ea) smiler a pendent o*t or %tja? tst;~tsae
DpeTetior. rtlic! and it pcrm,ned to tsfetari$ plat .x1111 be-csum Ohe nt-sbW'*ts'er.u to quatafy {of the
sperate t? 1+ De Oertbtt 31 1U4 0S to tt err "evoke at slaeboa at a ~ectioD tCI$(4 IX, W In esdusiot Ina
JL-oust a pant of aectiav't~5ib) rsbeL ~p'~icalat btu i' writ! rc~ttt to S free tnxcat. t ' cafeteria plies do"
saanr+er the, rnsbI'+
special tranattiOt relief as at col Is lyture i ~ and in-stead eseeJva the art operate it
QZ?A-his tad avaStable to wd ler at isbte birdie tot sb period and (ii) Mrticipant$ to pwro ere pt3vtrtre its
te
Q-r. 1ti e e w Do! be b is t sd as The bet *07 toe periods d rt j ? bleb
dr,D iQ iL 7C of 6-e are rut 0?enbjis ti the le ~ cons t rvcti v e tY reee'v sd s mwrnb tit part ripe nb s rpect to to c e c;vwgpd
~ ere b J , s~ to cis that have been aN aside 0ubjetl to a Srp< a+sn (COLA-17 a Q~L)
Aenta', er~r+itioe Pak? !;cruet d t e
A-r Reber under the rberJ transitive bred drseributioe of wltA4711-41 rfst Notrrlt?sstaadar>a Clot tDD
ssadr as arranae~t effective dater teach the PAWS)
rate is is plat td with respect to both this t+snstti nala a plea WIN) Perth Ss
tstetc e& plan tute- and arit}a reaped to ie uedtto the p d pp raa.apb p,plam to carer aver or recalv's. alto
6.4 `asebb ao.sr~ninj the tasabtLtr of we etirctlvs with reaped to a plan a Oscsmber Tl, heal. a casbart Of
Declassified in Part - Sanitized Copy Approved for Release 2012/10/04: CIA-RDP90-0053OR000400780003-5
 Declassified in Part - Sanitized Copy Approved for Release 2012/10/04: CIA-RDP90-0053OR000400780003-5
? rsdtrr:, Resister I VOL 4L No. sit I Monday, December IL 1N4 I )Ropo.ad Rules
amts a.aIIabL but mused steads a ooe,trtbotsoos (taeludinj aa2ar7 eedm:liae r/ Q&A-U mart be wtidW sett!
Able Spendmu arrance mr-eat ar at am trtbu bona) to be m a do WI tk es.pett seeped to aed aaeom
December !i. IL04 Suo-ly. sxpessa r the broebt is Erred prior to January L G-M What mud is Hide" ix
ttirob6rwm4ats a nder &;: b -tgR,6 (or, Irk tn, riot m the date en ar eterta plaaa ar bes>aellts that ware
spandit4 arrsngemeot May be aaade w tick tba lodivi ual Ent b+wum ot}dfbte foe tretu]dtioa rttief wesde3 15e
rafter Devmber R, tN4 arc! .I ble to participate ardu tba befit}; ~ .lesion proposed ea May 7, UK bwt -
R;a,b? raements relate to expenaet pi) the smptoyer aoatrlbut$oaa are are sat .t4 ble lot groaral asaslteoa
hm rvd and oo,otn'butiore made cc w deposited to or wedsted to an acoocmt relief as set forth to QLA- I
before D-cirmbrir 31.19tN f'1naDy. a j(iianctudinj an entry on the smptayv a A- QLA-ZS p, rides #t%)
plan trill &a be treated as operet.terg 1A `ooks'setablisbed on behalf of tea aranaition retior Daly to those cplass er
permit pr c4ants to elect Dovsrye participant by the employer before b&~ bentRta to exiateow m of bettos.
taty la taso& is which the made availsble for express Tebrtiery It 19H The proposed
participants expect to {tour c.r teed rtiatb,.6mauat?. W) neither die ]bona matt
expense merely because the period of participant nor the employer b.$%v the baru;ttoe relief fort e~vFlaw or
Coverage with respect to a flexible :s it to enc.-east or decrease bereft, in extcteau at a before May 7.
spend:nj arrangement is tormi ated on Datributions to the account during the 19:4 Thus, piaaa ce benefLe which were
])*umber ri. WWI, period between January L IOU (or. If sot it exislenu at of before February
Q-21 What rtl,cf to provided under liter, the date on which the tod;vtdua.l 14 1964. but ware In existence w or
IM sprig` tranatboa ru1eT Ere" becomes el,rblt to participate before May 7,1964. would have been
A-U Except as provided below. for ender the benefit). and July L lo6S (but amble for eraasitioa rebel under the
purpose of the ap;ideation of the rules oontributiora may be term;nsted durirtj resulations as or=in,L'y proposed but
set fort.! in the followiry paraf+pph to a &is period on account of tbt are sot etiitblo for general transition
b,entftt is a cafeteria plan (iac,ud:ri a parbr;pant's sepa. atom from the service miler under QLA-Z5 With respect to
benefit that is provided through a of the employer, and contributions may suck plans and benefts, the following
ttxibla a end--4 a sr,aertent; that be term..n+'ted or tncreaard or detmaeed relief is provided:
f a *Lr, a for the Sent-al transition --Ate of account of send consistent with /~orouch Number 11,104, the oertaia cl .r es to family Status, as let Cc!eta.,c Plasm AWN
othtrvrist applicable effective dates forth is QLA1 Dt with a ebange to A eafetaria plan that felled to satiety
seder the general t?nsltioa teak. wt employment status fo to tull-to one or Mort of Lbs fotloir~ Males lDr
loess is QaA-23..wiI be applied by pars- or bom p plan yeah brginrtirta at or before May
subs>rtvtutia lu)y L 19tds, it Leu of and (iv) distributions art sot available f.1 4 will sot be deemed ttaartby tea
January L Itta35. wiLl respecs to contributions made after Lave fatted to seller wet ce 1.Zb for
The sped]' transitioc rule appiM D~ecemb.r St 1984, for rececr other wet plans yearn its by September L
ith rupee! to the followinj to (1) in than the rtirr+bu.'eement of covered 1964. the plan was amended to operate
rder to Qualify for the section. ltzst'b) erpe'see before the settler of July L It mordsnu with these toter: (I) the
tx_I::t;ot trim g-oss lawns medical 2985 of the px-b:iar.t't separsbe
riult s 6r; cartair mfom%&bat to be
axpa:.aa reimb- ?csen4 mica; be from eke servdu of the e p oytr. bctudn it the cafeteria plat document
proov-ided under a med.;.]'. btne' that i~rsc _' .i evadable but us+usrd. as of (Qc-3~ (tih the ruIts i plat document
the
r~ b,u the r.1,1.6;!try read Pak- fuse X !tare: for a pie- Q,ten r a active pariic ,patior of a participant's
alts r bubon cb--a ctenst':,e of info Lance oe..i it a u.c,rna as eraL for cast in a ufeterta ,,aa W
,..A-17.. and (ii) iz order to Qualify for sp+c.a1 transition rt'.se! me) be (t) used sy im the case of a plan undo! wbkh )
lbt s.e:Lon 106,01 ,12C or 12G exr}us,ot to re~mb~:ac cov trod expenses ircunwd oicips:n!.t were pertains-d sterilise to
kom g-oss tnc.ome the med,caL before July 1, 19d,. (ii) distributed is over unused btaefu for more than
depe-,de! cart. or Iega' expense cash to participants (V, used to provide ?~
tre.mb ee? er4 mus' be provided under the p6tic1pan4 wits arj ot, tr taxable see p,as yea DOT to ooarett seta any
is be e!i; with rupee to which a at oon'axable benef,ts (e j.. eontribubon other benefits any unused braeflts that
pert:ipsn' i+ not entitled to reu`v& to to a qu. Fed profit-s'+s-i,nj pier), or (iv) had beer rwntd the Mil o' e oto t ~ ; west
like form of cash or some other ttDOL ]made evallable for the reimbu,reemeat of ~- yorty t
any unused cxeotri theeors or
sa'our.ts available fora M mbur?eaetat covered exptrses tn:urred after Joz s yo, benefit from ant plea year a a
w ,:,scat regard to whetker the Iti55 L amour,] unused as of June'G,
participant ircu.re covered expenses 1954 rtmstsa avaCsbit for subseeaurat plan year (QLA-T' and (tv)
du.r;.rt t} period of caverajt (QLk-17 rt mb,.;eemeat of expenses interred the rules Litit;rtj the rtvoeabi1it-j of
and Q&A-18) For purposes of the before July 1. 1953 and are be Dada benefit elections (QLA4) A ca eteria
special transition rule. a period of evalable for the rtimbureemeflt of plan may treat the portioe of Ira asntat
coverage trom January 1, 1965. through covered expenses incurred a!'.er June 3Q play year remalnir4 Liter September 4.
vane 7tG. 1985, w11i satisfy test Males, IN ISM, the pes!?Jurse reimbursements of Ifs see new period of crvtraje tot
44A-17 sad QLA-1L prec)udizna a July expenacs wits' not tau to quelefy h am of sat' isf=ittij the lilies
p~'a
Cafeteria pier mom operaunj to Pe root ion the -ect;or 1OS;b1. 174 or 129 warn rs benefits eloctoru fQ&A4
rticipaatslo puttl:ase cottage oC?y sadus;or, from Foss income surely /-'so. a beoeBt off.nrtj pea icip+nta tbs
rperiods do rJ-4 whkk the participants because any amounts unused for sorb epporturh' to salt e4eet o
Axpect to teas: oovertd axpemcaw. pis Jul{ rises are p,ravided to the eontnbution] wider a gw&IIEed cash or
Notiriths'.ardinj the fortgoirrg lore o(casb w acme other b.nsbt. to defted ar*aolem,ent may be ineJudod
parapap4 the ot?.erw!es applicable cipanta before Number 3%. is. In a cafeteria p.ea oetJ7 to plena year
affective date set forth is Q&A-" wla IL however, amounts unused as of Jwas be var4 ].Rat Dec.. w Pt 1tto0
Tlaabni0- Of
woe be modified by eubsttutiry July I. 95. 1965, fox the rwimbursemeat of R,a,laY 00vetrtirsg the
19L5. it Lou of January L 1965. came.. eavared expenses lacurrtd before )v)j L &jwp;
rat particular bereft is question %*5, an made evailgble for the
wddast
er aDan s e clat err
satisfies the followinj oondJtionr M the wart-semeot of axpeases incurred b tan ~ tbe 1o coverage o ur+dff. Da
&MOUnm at sped5c rate of uplcyw after June % 1955, the rules is Qa.A-1f p Pt
Declassified in Part - Sanitized Copy Approved for Release 2012/10/04: CIA-RDP90-0053OR000400780003-5
 Declassified in Part - Sanitized Copy Approved for Release 2012/10/04: CIA-RDP90-00530R000400780003-5
? Tetdes) L~nhr ! VOL -IL Na a2 I MotadaY, thcouber M. !!M I proposed RnL*
sm-mmon
.ettt~tsa tar goa>'>~ed !off ~+ d amp~~t, darter fit Iir
vim PLU versa oQarsd v a benaat rtr'j
1b7 a c:htnia PILO sad acted befit so Tfe aaomtt (or mxc& 11111.) of
to W%*. mat haf on bfry 7. aetaes~ta*e tiatna m the 6eaat maw as
tie Wok ptshtb W* a pica "M Werjamest eru 1.ud rim b 68
tu* b enable a partidpant k ttw bit of tba Pt+a tsar,
r ttttt as ataddeto( or b$GM pdi) Netttrc t a p+r'DdPaat tsar for
dept can asrbtaea~t wn~Icy w pot w t-ed tbt ri*! to mrasase
se V? hit ar d.ct a sa sam trSbo tS sou to tbt ? oramet
~ 064 for pe+o~de d OUG dLrug the ptaz 1 &? (btrt t ptlZ 11b"
parttdpant e>pwu to nut" eartde that ooatribvtiona ooold be
6161 `rrmir~atsd dwij t s year m bomw of
(QLA-r sad Q&A-v1 wed- be par6dpant'e ((aj -epar,t1cm bam
bt try' lsot be Qe~ac~ad td+h W tlern'ta6 er (b3 ocwttoe d partldpsd
at dnt~ f& are tp VK fLOW b amdr. the arranjctasat fix t e rsma7 tb+ state r) notes p+wt * kr of 6e plaa nark
mt:Rat a tau tot d rte oa*sr~s (t.) Captr^aoti oa wen wtmby
ao 7 beatD b pr'vri,1 t?d tLa rradttr. de tad k or Orb ltd tC the -t: MNO
Scpttmbe3 1.1961 the aJetsia bet~o*t beirst m,4 avellabia for
piaz w b amead ed to opt rate ti talmbu ne e'n t sad
rd4x1m Witt' - e1ac or (v) hut:- ~ibo^.i Wert Dot SVIsabk
totr.true ruin A Wetertia ptaa My jot naaoas other that retmburtwcmaul of
tai t u pub ot d f b maim i prat >i': to v arrd a xpe : A e t na tO the ttttad d the
Rmaimsj &! or Septembu 4.104 as a plat ear ar until Dtcrmbtt VL %PK
straw period of Dova-ape awe u ac &edtia3 wt;,; ever L euLer (bat a plan may
yaw for p'~.rpw,et d betady' the provide that a strtitle dstrtbutSot d this
rule prohbi tiny{ a p'et froa oPr-a h.4 to awe :a b 6.n td ba:aeO ma 7 be ma dr m
*table part d,aDL to e4ec! ovwwt lye &WOUa! d the partidpaat't (a)
under Lt eoddent of health ptaa w;Lmboo tom aemat at (b) usaatiaeo
&pandant can aaa:s!a.nce pratt . or of p,arbcipaboc Lbdr the awemW
~+alined F V4 kp! se qon plat oa17 lot the rematr>'w of the plan rw). .
fa p+node d6r+r,&.vhtct tLe a O IV A t&.teter.a plan may operate is a
arcafve me?djur cart dtpendra' care. W 1as year other that: the C4Jtedar
'1&J re n- a (Q.LA-17 sad Qi.A-98 fm P.,,p t d tLs ftwit,ona! ruin. W
14 a d d: c ab p t be trod ti oaa W Ford kci u Ltd tsrms of th. pt.n rmlt
stow are ute!ed armplcyar Wrt butoaa to a plan to be bard aeJ7
emtr+buuona (ine'udw7 a.etLas and once dwmtst a.rd a d sv4buboe of the
$ ,f t PC t t coo t-tbv +bo :a mast Won wrrt ~m f: ~..ee amo.:a t to be cwt wd
juar L 19bt un d e- ar ar+a.nr me n t =:y Om m to, the pe ri of 'aet:nair, j with
t6cscr(sxd it the rw-x, settenae rh+ct is the piss ym and endarj oo rates the
tT+ of a caf t? cs u p!ss UPC mt be ~ci tt be ri . I OK pm vid rd W t
Qsa!rd AI - - L - made to so a ttfbut a mss) be fed tar a eb1x1
sect de n ! cr bet 1 tJ: p : as. de pee ' gars -tar year of the pl ar' a L-s! pe od of
aa.ai-'an;.t ass oe Qua! Reed pac:p ebon J%. tanslt;one'. nle dote not
je;.: at-v;;,et p;am ea' i`:is to 6+tsaf7 &fr or 6!'c the rsqu.rcta+eet of Q&A-
the rover ovt'ast6 it tu.e t-raond sad 17 and -11 tba' expenses that an
ll,,rc+ pi-era:tiu of QA-17 and the first R{y mrd cede at a--wryem"', O
ar a p? od Q Lt - L m e rtl y be' ca ;ua , h:-.t been tr, cvr*rd d wir4 the period im
for LS, Pe-)ad tx&?a $ w,4, 'b tLt Ptaa w}ud t t p.a^bdpar+! 6c &Ily is
l t w 6 r:c t ->d.-4 nc late., O t t e ,*c bw Voss r e bx the L-*aWteed
E 19154. a part.c,pas! +raa entitled tea (k N x S ; of the tax Return M of Ism
>sC VL Ls tDa fora of cats or say other tw; 0411
la+ub:e or aan!aubte b~eoet}L aaouatr Ufa. W.
sva'lable to rrLmt,.rseaaeet wadv the Iron, L, Lt rnolArvwna
ar*. r m tlf t u'i ;Lau! r".rd to w 6e thse Doc lest t'Jed u -tam n ]a 111m)
co v e rid a 'ae nit a an Lnc~ .trod. Ail
artarjtmea! L dtac:ibed M We aa..+m tooat sans e~r4a
a,entens Only If. under the mraryeea*et.
(n As au rtt w'es octuaZty
at'abliabtd m be hall of the pW%dPatat
by t ht employer, by at w!77 oil the
tes+ployat's bool.a at La olrsaar itsdto .
r or to the ' eg! W%;ry of the Dla>' tee:
pm o? to the date on srhld to
lsdvid ai first becoraee eLt1bi Is
wt:cipett under the arMr-atmemi in 60
%aet o, am L it vi d..a! % +o fjii b+sAmr
-ftroje it participate. as saootttaat of
um
Declassified in Part - Sanitized Copy Approved for Release 2012/10/04: CIA-RDP90-00530R000400780003-5
 Declassified in Part - Sanitized Copy Approved for Release 2012/10/04: CIA-RDP90-0053OR000400780003-5
Faders) Regista'r / Vol. 51. No. 23 / Tuesday, February 4. 19at3 / Rules and Regulations
ttompenaation bra rte otili:ed by a
plan will be examined to determine it
the brackets, o* compensation
r upi s, mi.3t in &scnminatioa it
or of key employees to additim a
plan doers not meet the requirtmenta foe
ss'ondurrirait+a?Loe as to the type and
amount of betxfits ova"able under the
plan unless ell types of benefits
(includirj pervtaner benefits) and of
tercets and condition& with respect to
suet benefits which are ava;tsble to any
participant who is a key employee are
also available on a nondiscriminatory
basis to non-key employee participants.
Q-10 How is additional coverage
purchased by employees under a plan of
,croup-terse life insurance treated for
purposes of detero-iri,ng whether a plan
of group-term Lfe insurance is
dtscsiminatory?
A-10, (a) The extent to which
employees purchase sdditional coverage
under a plan of group-term life
ins.:ranee is not taken into account for
purposes of determining ihe'.het a plan
of group-term life insurance is
discnminstory for example. a plan
prvv iding insurance to all employees of
I tines annual compensation. which
=:ves all emplcyeel the option to
purchase additional insurance of I times
annual compensation at their own
expe:se. would not be considered
diacnminstol as to the type and
ar-.cunt of benef.!s aLa;)able over if
group (or groups; of participants w
purchase add,+.o^.a' unsurerrce if toted
Sc':e'y for this purpose the oho a of an
amount of group-ttrr.. life inn sauce as a
benef,' under a ufeter,a pis Will, be
treated as the p'.;-ehsse of p-term
l,`r iriurance b) an err cl tie If
e d:ticnsl insurance coo Sgt is
a.a-;able to any key err. that is
not available or, a non scnminstory
basis to non-key emp yee-s. the plan
Will be considered d, cr minatory even
if the full cast of a add:tiomal
insurance coverag is paid by the
emp'loye'e(s) elec g ss-h beneftta.
(b)IliOWamp yerbeers apar'tofthe
expertise o! any dditional coverage that
is purr_has d an employee wider a
plan o'pow term We insuraDca. the
add.,tonal ' sunny shall be treated. is
part al, mtunt of inswaxcs
provided y the employr. under the plan
and is rq, as an a.mourrt of inaurarxcs
purcha by the employee ifx;spt to
the a ent provided in subparagraph (a)
abo the portion of insurance treated
so amount of insui-erice purchased by
employee is not taken into aaeouat
purposes of determining whether the
an is diacsimiaatory. Whether such
Inauranas (torether with any of
tasurana provided by the amp. er
tender the plan) will cause the ?o to be
considered to discriminate it
von of
participants who are key ioyees is
determined under the rules f Q&A ?.
Q-11. What effect do N provisions of
section 7>i(d)(1) have if a an of groupp.~
twat life insurance to di iminstory foe
A-I1: If a plan of up-term life
tnaurance Is diacrim' story at any time
during the key emp yee'e taxable year.
then it Is a discri 'story Loup-term
life insurance pia for that tax rble year
and the provisio a of section "9 d)(1)
will be app) u :e wrath respect to all
poup terra lit nsurance costs allocable
to that emp' ? ee for that year.
Q-11L the section, 79; d; provisions
btdepende t from the requirements
eontaine m Tress Reg (1.7~It
A-12 es Tress Reg ( 1.716-1(c)(1)
proved that life insurance provided to
a gr-o of employees canteen qualify as
rrou terse life insurance if .1 is
pro dad to less that ten full-time
t leyeta unless certain requi-tmenA
a satisfied The saris!action of these
quirements dots not guarantee that
e plan will be nondiscriminatory and
vice versa Treat Reg I Lull-1(s)(4)
provides that life insurance is no! group-
term life insurance unless tie amount of
insurance provided to each employee is
corr,pu'ed under a formula that
precludes ind.v-dual se'.ection The mere
tact that a life insurance policy is
nondiscrrr.:r,ator) is not dete-r*.inat)ve
as to whe:htr the policy precludes
i'id.vidus' election and vice verr,a
Par t The followirsj section. is added
immediately after 11.123-1:
( 1.12 -tT *.,tst.oe ae4 sps+rrr retatsng
to lino be t is tt.a! --ray be o~a'IQ j-4v a
is .t. to plan am,porwy)
Q-i What bereft.. may be ofTered to
participants unde- a caft!er.a plant
A-1 (a) Centrally for cafeteria plan
years boes_-vi ng or or after January 1,
1985 a cafeteria plan is a written plan
"der which participant; may choose
amon two or more bent!its consistiq
of Cast and certain othe erosible
benefits in gteneral benefits that are
exnludable h-ore the gross income of an
employee under a specific section of the
biterrtal Revenue Code may be offered
under a cafeteria plat However.
scholarships and fellowships sunder
section 117, vvipooltng under Section
124. educational assistance under
section 127 and certain fringe benefits
wider section, 132 may not be offered
under a cafeteria plan In sddibon.
reale and lodging under section ill.
because they are ?uroi shed for t h*
soevanim.ce of the employer and thus
are not elective in )lieu of other benefits
ar compensation provided by the
employer, may ttbot be offered under a
cafeteria plan. Thus. a cafeteria plan
may offer coversge under a group-term
life insurance plan of up to fso,xc -
(section 79). covviar under an accident
cite health plan (sectlbns 105 and 106).
coverage under a qualified group legal
services plan. (section 120), coverage
larder a dependent care assistance
program (section 129), and participation
is a qualified cash or deferred
arrangement that is part of a profit-
sharing or stock bonus plan (section
401(k)) In addition. a cafeteria plan may
offer group-term life insurance coverage
which is includable in gross income only
because it is In excess of S50.tb0 or is on
the lives of the participant's spouse and/
at children In a' dttion a cafeteria plan
may offer partic .,ants the opportunity to
purchase. with after-tax employee
contributions, coverage under a group-
term life insurance plan (section 79),
coverage under an accident or health
pier ;section 1O$(e)), coverage under a
qua;;fied group legal services plan
(section 120). or coverage under a
dependent care assistance program
(section 129) Finally, a cafeteria plan
may offer paid vacation, days if the plan
precludes any participant from using or
receiving cash for. in a subsequent plan
year any or such paid vacation days
remajnsng unused at of the end of the
plan year For purposes of the preceding
sentence elective vacation days
provide: under a cafeteria plan are not
oor.s.dered to be used until, all
ncr:e)tcuvt paid vacatioe days have
been used.
(b) Note that benefits that may be
offered under a cafeteria plan may or
may not be taxable depending upon
` whether such benefits qualify for an
exclusion from gross income However,
a Cafeteria Ian may not offer a benefit
Nat a taxable because such benefit tails
to "na"y any applicable eligibility.
nondisctiatlnation
coverage or
requirement Similarly a plan may not
offer a benefit for purchase with after-
tax. employee contribution if such
benefit would fail to satisfy any
eligibility coverage, or
stond,scnrwnation rtqutreoeat that
would apply if such benefit were
des ;red to be provided eon a
sontaxable basis will employer
contributions Also, Dots that section
i2Sid)(2) provides that a cafeteria plan
ray not offer a berveM that defers the
receipt of compensation (other than the
opportunity to make elective
contributions under a qualified cash or
deferred arrange rent) and may not
Operate ins mariner that enables
Declassified in Part - Sanitized Copy Approved for Release 2012/10/04: CIA-RDP90-0053OR000400780003-5
 Declassified in Part - Sanitized Copy Approved for Release 2012/10/04: CIA-RDP90-0053OR000400780003-5
Federal Reeirter / VOL $i, No. t3 / Tbeaday, February 4. 19W / Rules and Regiulations
partidpants to defy the mceipt of
toompeass tion.
Per 1 The fo17ow{n4 new eeettoe is
added immediately sitar I Li$34T:
W sttartam or wukf loans eased to
!ro'ci r+- wow ttisa R 7)
A-i-fr nereL section 133 provides
slat certain mercial lenders may
eosdude from u loco. laity pertsnt
atf the interest efvsd with repent to
aeczsritita acquit on bans A sasaaribss
acquisition loan is y loss to an
s playyeett stock own hip plan (ESOP)
(at defined in section ? S(e)(?)) that
qualifies as an exempt under
$154 44'1 - and -11 to th xtent that
the proceeds an rued to a re
employer wove ties (within th ,eanin{
of section 409;1)) for the ESOP.
M'P (or to a penot related to se
corporation under section 133(b)(2))
ban to the extent and for the period that
the proceeds are (a) loaned to the
corporation's ESOP tinder a loan that
qualifies as an exempt loam under
11 54 44"S-7 and -11 and that has
substantially stm Jar terms as the loan
from the commercial lender to the
sponsoring corporation. and (b) used to
acquire employer securities for the
ESOP The terms of the loan between
the w>rraertia: bender and the
sponsor;-4 corporation (or a related
=.orpora!lor And the boar, between such
corpcrat,cr and the ESOP shat be
t,res~ed at swtstanr,a'!y s;rt.1sr only If
the t:a. nr and rate at wh+c.? rmpioyer
secant,ea wo;id be released from
src~,brance if the loan from the
corr.rerua' lender were th, exempt ban
ender the app')cabie nee of 1 54 44-5-
1+(b) 5' are a,:tstantisily am hat to the
Lrt:r4 and rate a! ..hrch employer
secunt;te wlL sctuai!y be released fratx
encurr.brsnce it accordance with such
ruit For LhA pu. i. if the loan from
the care ?,er, e' lender to the spot ser,ng
corporation states a tunable rate of
ta+terev and the loan between the
corporation and the ESOP states a flied
rate of interest, w?ht'_~er the terms of the
loans are substantially similar shall be
determmiined at the tines the obligatima
are thJtla.lly issued by taking into
account the adjustment interval on the
.ariablt,%te lost and the maturity of
the flied rite can For example. U the
rate or the loa from the commercial
le-,der to the sponsoring corporstioc
s uits each six snonths and the loan
fr., m the corporation to the ESOP has a
ten year term the initial interest ram on
the variable rate loan could be
compared to the rate or the fixed rate
aoaa by comparing the yields or t mmth
and tea year T?tasury obligstims.
?la+ilariy. if the rates on the two bans
an based at different compounding
ausumptlors, whether the terms d the
bans are substantially drnilar Shall be
determined by taking into account the
different oompoanduy aasumptioma. A
aecwibes acquisition ban may be
evidenced by any note, bond, debenture,
or art fats Also, section 133(b)(2)
provides that certain loans between
related persons an not tectsritln
acquisition loans In addition a ban
from a commercial bender to or ESOP or
aponsortng corporation to purchase
employer securities will not be Crested
as a Securities acquisition loan to the
extent that such loan is used. either
directly or indirectly. to purchase
amplcyer securities from any other
qL lifted plan. including any other
ESOP, maintained by the ernploye'r or
any other corporation which is a
member of the same controlled wove (as
defined in section 409(')(4)).
Q-2 Wha! lenders an eligible to
sot Sion?
A- Linder section 133(x), a bank
(within a meaning of Section Sllr). an
tnsur ano ompar.y to which subchapter
L ?pp'.es, a corporation (other than a
tior.) actively
engaged in Nws of bending
Money may efrom gross income
avbchapter \~'v
t1f?) percent te-es, received
with. respect -".ies acyuiaitoa
leer (as defn-1 of 1 1.133-
1?) For p"-psec n 133(a)(3). a
corporation ily
en d is the
bua.nras of leoney ' t lends
money to the n a reg. ? and
continuing `..aer than tr,
ppublic o(goods and services from
finder or a re'.tad parry A eorporat?1n
Is not actively engaged it the business
of lend.rig money if a predoc.:nant stare
of the o;;g'ra( value of the boasts it
makes to sure-t'ated parr. (other than to
connection with the purchase by the
public of goods and services invert the
sander or a related party) are securities
acquisition loans
Q-3 May loans which quelify for the
fifty perzarnt interest exclusion under
section 133 be eyndl sated to ether
kndirtg institutions?
Aa Srurit,ea acquisition bans
under section I11 may be syndicated to
aoher lend.ng institutions provided that
sock lending institutions are described
to section 113(e) (1), (2) w (3) and the
loan was ornr.nated by a qualified
bider Subsequent holders of the debt
Instrument may qualify for the partial
interest exrJuaior of section 133 if such
b olden satisfy the requirements of
sactioo 133 and ouch loan does not tail
to be a atturitita acquisition loan tinder
section 1**(bx2).
Q-t When Y W UM 133 effective?
At Section 1.33 applies to securities
acqut Uoe loans made after July ig,
2964, and medic inquire employer
securities alter J.ly 16 1061. The
provision dots Dot apply to loans made
after July 13. 1964. to the extent that
rich loans are renegotiations. directly or
indirectly. of loans outstanding on such
date. A loan amended to an ESOP or
sponso corporation after July 10.
1964. will be treated as a renegotiation
of an outstsn4 rig loan if the loan
proceeds are used to refinance
acquisitions of employer securities made
or to Jul) It, 1964 For example if an
or borrowed money prior to July 19.
IA4. to purchase employer securities
a.nd after July it 1964. borrows other
funds from the same or a different
conimercia' lender to repay the firs!
bam the Second lost will be treated as
a renegotiation of an outstanding loan to
the extent of the repaid amount.
Eiinilarty. if. after July it 1964, an ESOP
sells employer securities. uses the
proceeds to retire a pre?Ju)y 19. 1984,
bar and obtains a second loan to
acquire replacunent employer
securities. Ne second )oar, will be
treated ass renegotiation of an
outstanding loan
Par. l Tice fo:Lowirtg new section is
added immediately after I 1.162-10.
1 1.t42-16T o?esttoed seat aftewers
retst.Fl to try. 6. CtiGl of M*D;oyet -
tbane'is ur+6e+ the Tax eto'm Art of 1904,
sertat- tkr+rt3 oe W%ounts 6ed,?c"w*.
RM+Poewy)
Q-1 Nov. does the amre dment of
section 404(b) by the Tax Reform Act of
1964 afTec! the deduction of employee
benefits under section 16, of the Internal
Revenue Code?
A-I. As amended by the ' a Re.'or=
of 1934 section 404^x; clarifies that
sec or. 4t04(a) and (d) (+n the case of
arnp tees and nonectplcl tea.
tttsj+ec e)y) shall govern the deduction
of came 'tons ptid or ccmpenaa`ron
paid or it -red under a plan. or method
or arrantem t deferring the receipt of
compenaati?on providing for deformed
benefits, teetio (S)and (d) rputes
that Suet, a ootttri tton or
compensation bt pa or incurred for
purposes of sect ion 1 M 21 2 and
satisfy the requilemtnt or deductlbilit)
W.-der either of these Sect na Howevn,
a-otwithstariding the above. Coon 404
does not apply to contributro paid or
accrued with respect to a `wet re
benefit fund" (as defined io sects n
Declassified in Part - Sanitized Copy Approved for Release 2012/10/04: CIA-RDP90-0053OR000400780003-5
 Declassified in Part - Sanitized Copy Approved
San Diego. CA sific ion of foundation status it the In-
e I-,
i
i
s
po
World Equ
-
Wranglers Soccer Club, Plano, TX
Youth's Hope, Northridge, CA
if an organil.ation listed above su
mits information that warrants -
news] of its Classification as ng foun-
charity ~r as a Privg~
dation, the Internal Re ue Service
will issue a ruling or rmination let-
t
foundation sal Grantors ono cwnno-
utors may after rely upon such tall
ing or de ination letter as provided
in se 1.509(a1~7 of the Income Tax
Re ations. It is not the practice of the
nie to announce such revised clas-
Revenue Bulletin.
years beginning after December 31,
1984. The Service will issue regula-
tions Soon stating that these plans
should file the required return W either
Form 5500, Annual Return/Report of
Employee Benefit Plan, Form 5506-C.
Return/Report of Employee Benefn
Plan; or Form 5500-R, Registration
Statement of Employee Benefit Plan
The forms and their related mstruc-
bons have been revised so that fringe
benefit plans required to file need only
complete specified items.
For more information, see forms
5500, 5500-C, and 5500-R and instruc-
tions, which are now available.
Mnual Return Required for Friage
knefit flans
Mnouncement X6-20
Section 6039D of the Internal Reve-
nue Code, which was added by Public
Law 98-611 and Public Law 98-612,
requires group legal services plans de-
scribed in section 120, cafeteria plans
described in section 125, and educa-
tional assistance programs described in
section 127 to file an annual return
with the Internal Revenue Service for
Declassified in Part - Sanitized Copy Approved for Release 2012/10/04: CIA-RDP90-0053OR000400780003-5