Can a sole proprietor, partner, member of a limited liability company, or more than 2% shareholder in an S corporation participate in a Cafeteria Plan?
A. No Under the provisions of Reg. Sec. 1.125-1 Q&A-4, a sole proprietor would not be allowed to participate in a Cafeteria Plan. A partner in a partnership or a member in most limited liability companies would be considered similar to a sole proprietor. Under the provisions of Co(-le Sec. 1372, no more than 2% shareholder in an S corporation is treated a partner in a partnership for certain fringe benefit purposes including participation in Cafeteria Plan. Administration Q.
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