“Simple Cafeteria Plans” Available in 2011

Judy Miller, MSPA, ASPPA – Chief of Actuarial Issues

A publication of the ASPPA Government Affairs Committee

March 25, 2010 :: No. 10-13 


The health reform bill (HR 3590) signed into law on Tuesday, March 23, 2010 included a provision

creating “simple cafeteria plans” for small businesses, effective for years beginning in 2011. Simple cafeteria

plans will be treated as meeting nondiscrimination requirements applicable to cafeteria plans if they

meet certain minimum eligibility and participation and minimum contribution requirements. This safe

harbor would also cover nondiscrimination requirements applicable to certain benefits offered

under the cafeteria plan, including group term life insurance, coverage under a self insured group health

plan and benefits under a dependent care assistance program.


Eligible Employers

An employer is eligible to sponsor a simple cafeteria plan if, during either of the preceding two years, the

business employed 100 or fewer employees on average (based on business days). For a new business,

eligibility is based on the number of employees the business is reasonably expected to employ.

Businesses maintaining a simple cafeteria plan that grow beyond 100 employees can continue to

maintain the simple arrangement until they have exceeded an average of 200 or more employees

during a preceding year. The usual employer aggregation rules under IRC Sections 52 and 414 apply

for purposes of determining an eligible employer.


Eligible Employees

All non‐excludable employees who had at least 1,000 hours of service during the preceding plan year must

be eligible to participate in a simple cafeteria plan.


Excludable employees are those who:

• have not attained age 21 before the end of the plan year;

• have less than one year of service as of any day during the plan year;

• are covered under a collective bargainingagreement; or

• are nonresident aliens.


Each eligible employee must be able to elect any benefit available under the plan under the same terms and conditions as all other participants.


Minimum Contribution Requirement

Employer contributions to a simple cafeteria plan must be sufficient to provide benefits to non‐highlycompensated employees (NHCEs) of at least:

• A uniform percentage (at least twopercent) of compensation, whether or not the employee makes salary reduction

contributions to the plan; or


March 25, 2010 :: No. 10-13 :: page 2

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