This bill would eliminate the requirement of current state health law that small employers who offer a cafeteria plan to eligible employees must offer the plan as a group plan. Employer sponsored cafeteria plans would then be allowed to be offered to individual employees on a pre-tax basis. Therefore, this bill would expand the market of potential participants in a cafeteria plan.
Current law does however, allow the marketing of plans to only ineligible employees.
Background Federal Internal Revenue Code Section 125 - Cafeteria Plans . However, if a participant chooses cash, it must be included in gross income as compensation. At the federal level, participants of cafeteria plans can effectively reduce their gross income by the amount of the contribution to the plan reducing the amount of tax paid on income. Applicability of State Income Tax . Since the definition of Colorado taxable income is derived from federal taxable income, the non-inclusion of the income of contributions to cafeteria plans at the federal level is reflected at the state level.