Publication 15-B - Employer'S Tax Guide To Fringe Benefits - 2012 Page 4
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33benefit as a reduction in distributions to the 2% share-
Eligible employer. You are an eligible employer if you
holder.
employ an average of 100 or fewer employees during
either of the 2 preceding years. If your business was not in
Plans that favor highly compensated employees. If
existence throughout the preceding year, you are eligible if
your plan favors highly compensated employees as to
you reasonably expect to employ an average of 100 or
eligibility to participate, contributions, or benefits, you must
fewer employees in the current year. If you establish a
include in their wages the value of taxable benefits they
simple cafeteria plan in a year that you employ an average
could have selected. A plan you maintain under a collec-
of 100 or fewer employees, you are considered an eligible
tive bargaining agreement does not favor highly compen-
employer for any subsequent year as long as you do not
sated employees.
employ an average of 200 or more employees in a subse-
A highly compensated employee for this purpose is any
quent year.
of the following employees.
Eligibility and participation requirements. These re-
1. An officer.
quirements are met if all employees who had at least 1,000
2. A shareholder who owns more than 5% of the voting
hours of service for the preceding plan year are eligible to
power or value of all classes of the employer’s stock.
participate and each employee eligible to participate in the
plan may elect any benefit available under the plan. You
3. An employee who is highly compensated based on
may elect to exclude from the plan employees who:
the facts and circumstances.
1. Are under age 21 before the close of the plan year,
4. A spouse or dependent of a person described in (1),
(2), or (3).
2. Have less than 1 year of service with you as of any
day during the plan year,
Plans that favor key employees. If your plan favors key
employees, you must include in their wages the value of
3. Are covered under a collective bargaining agree-
taxable benefits they could have selected. A plan favors
ment, or
key employees if more than 25% of the total of the nontax-
4. Are nonresident aliens working outside the United
able benefits you provide for all employees under the plan
States whose income did not come from a U.S.
go to key employees. However, a plan you maintain under
source.
a collective bargaining agreement does not favor key em-
ployees.
Contribution requirements. You must make a contribu-
A key employee during 2012 is generally an employee
tion to provide qualified benefits on behalf of each qualified
who is either of the following.
employee in an amount equal to:
1. An officer having annual pay of more than $165,000.
1. A uniform percentage (not less than 2%) of the em-
2. An employee who for 2012 is either of the following.
ployee’s compensation for the plan year, or
a. A 5% owner of your business.
2. An amount which is at least 6% of the employee’s
compensation for the plan year or twice the amount
b. A 1% owner of your business whose annual pay
of the salary reduction contributions of each qualified
was more than $150,000.
employee, whichever is less.
If the contribution requirements are met using option (2)
Simple Cafeteria Plans
above, the rate of contribution to any salary reduction
contribution of a highly compensated or key employee can
After December 31, 2010, eligible employers meeting con-
not be greater than the rate of contribution to any other
tribution requirements and eligibility and participation re-
employee.
quirements can establish a simple cafeteria plan. Simple
More information. For more information about cafeteria
cafeteria plans are treated as meeting the nondiscrimina-
tion requirements of a cafeteria plan and certain benefits
plans, see section 125 of the Internal Revenue Code and
under a cafeteria plan.
its regulations.
Page 4
Publication 15-B (2012)
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