26 U.S.C. § 124 — Untitled legal text

Page 582 TITLE 26—INTERNAL REVENUE CODE [§ 124 (2) the normal living expenses which would have been incurred for himself and members of his household during such period. (Added Pub. L. 91–172, title IX, § 901(a), Dec. 30, 1969, 83 Stat. 709.) Editorial Notes PRIOR PROVISIONS A prior section 123 was renumbered section 140 of this title. Statutory Notes and Related Subsidiaries EFFECTIVE DATE Pub. L. 91–172, title IX, § 901(c), Dec. 30, 1969, 83 Stat. 709, provided that: ‘‘The amendments made by this sec- tion [enacting this section] shall apply with respect to amounts received on or after January 1, 1969.’’ [§ 124. Repealed. Pub. L. 101–508, title XI, § 11801(a)(9), Nov. 5, 1990, 104 Stat. 1388–520] Section, added Pub. L. 95–618, title II, § 242(a), Nov. 9, 1978, 92 Stat. 3193, related to qualified transportation provided by employers. A prior section 124 was renumbered section 140 of this title. Statutory Notes and Related Subsidiaries SAVINGS PROVISION For provisions that nothing in repeal by Pub. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liabil- ity for tax for periods ending after Nov. 5, 1990, see sec- tion 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title. § 125. Cafeteria plans (a) General rule Except as provided in subsection (b), no amount shall be included in the gross income of a participant in a cafeteria plan solely because, under the plan, the participant may choose among the benefits of the plan. (b) Exception for highly compensated partici- pants and key employees (1) Highly compensated participants In the case of a highly compensated partici- pant, subsection (a) shall not apply to any benefit attributable to a plan year for which the plan discriminates in favor of— (A) highly compensated individuals as to eligibility to participate, or (B) highly compensated participants as to contributions and benefits. (2) Key employees In the case of a key employee (within the meaning of section 416(i)(1)), subsection (a) shall not apply to any benefit attributable to a plan for which the qualified benefits pro- vided to key employees exceed 25 percent of the aggregate of such benefits provided for all employees under the plan. For purposes of the preceding sentence, qualified benefits shall be determined without regard to the second sen- tence of subsection (f). (3) Year of inclusion For purposes of determining the taxable year of inclusion, any benefit described in paragraph (1) or (2) shall be treated as received or accrued in the taxable year of the partici- pant or key employee in which the plan year ends. (c) Discrimination as to benefits or contributions For purposes of subparagraph (B) of subsection (b)(1), a cafeteria plan does not discriminate where qualified benefits and total benefits (or employer contributions allocable to qualified benefits and employer contributions for total benefits) do not discriminate in favor of highly compensated participants. (d) Cafeteria plan defined For purposes of this section— (1) In general The term ‘‘cafeteria plan’’ means a written plan under which— (A) all participants are employees, and (B) the participants may choose among 2 or more benefits consisting of cash and qualified benefits. (2) Deferred compensation plans excluded (A) In general The term ‘‘cafeteria plan’’ does not include any plan which provides for deferred com- pensation. (B) Exception for cash and deferred arrange- ments Subparagraph (A) shall not apply to a prof- it-sharing or stock bonus plan or rural coop- erative plan (within the meaning of section 401(k)(7)) which includes a qualified cash or deferred arrangement (as defined in section 401(k)(2)) to the extent of amounts which a covered employee may elect to have the em- ployer pay as contributions to a trust under such plan on behalf of the employee. (C) Exception for certain plans maintained by educational institutions Subparagraph (A) shall not apply to a plan maintained by an educational organization described in section 170(b)(1)(A)(ii) to the ex- tent of amounts which a covered employee may elect to have the employer pay as con- tributions for post-retirement group life in- surance if— (i) all contributions for such insurance must be made before retirement, and (ii) such life insurance does not have a cash surrender value at any time. For purposes of section 79, any life insurance described in the preceding sentence shall be treated as group-term life insurance. (D) Exception for health savings accounts Subparagraph (A) shall not apply to a plan to the extent of amounts which a covered employee may elect to have the employer pay as contributions to a health savings ac- count established on behalf of the employee. (e) Highly compensated participant and indi- vidual defined For purposes of this section— (1) Highly compensated participant The term ‘‘highly compensated participant’’ means a participant who is—