What is the tax treatment of benefits offered under a nondiscriminatory cafeteria plan?
A-9: A participant in a nondiscriminatory cafeteria plan will not be treated as having received taxable benefits offered under the plan and thus will not be required to include the benefits in gross income solely because the plan offers the participants the opportunity, before the benefits become currently available to the participant, to elect to receive or not to receive the benefits. Section 125 thus provides an exception to the constructive receipt rules that apply with respect to empoloyee elections among nontaxable and taxable benefits (including cash). These constructive receipt rules generally provide that an individual will be required to include in gross income the taxable benefits that he could have elected to receive if the individual had the opportunity to elect to receive or not to receive the benefits event though both the opportunity to make this election occurs and the actual election is made before the benefits become currently available to the individual. Section 125
