May a cafeteria plan offer a benefit that defers the receipt of compensation?
A-7: No. A cafeteria plan does not include any plan that offers a benefit that defers the receipt of compensation, with the exception of the opportunity for participants to make elective contributions under a qualified cash or deferred arrangement defined in section 401(k). Thus, employer contributions made at a participant’s election to a profit-sharing plan containing a qualified cash or deferred arrangement will be treated as nontaxable benefits under a cafeteria plan. In addition, a cafeteria plan does not include a plan that operates in a manner that enables participants to defer the receipt of compensation. Generally, a plan that permits participants to carry over unused benefits or contributions from one plan year to a subsequent plan year operates to enable participants to defer the receipt of compensation. This is the case regardless of whether the plan permits participants to convert the unused contributions or benefits into another benefit in the subsequent plan year. For ex
