Texas Attorney General Opinion: JM-543 Page: 3 of 5
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Mr. Lawrence K. Pettit - Pa;e 3 (JM-543)
1861-62. Moreover, optional insurance coverages in an amount in
excess of $50,000, usually includible in gross income, is treated as a
nontaxable benefit when offered in a cafeteria plan. I.R.C. 125(f);
see I.R.C. 79.
The Internal Revenue SErvice has issued a temporary regulation on
cafeteria plans. AccordinE to information published by IRS in the
Federal Register, taxpayer3 may rely on this temporary regulation
pending the issuance of final regulations, but it is not intended to
address all issues raised by the amendments to section 125 of the
Internal Revenue Code. 51 Fed. Reg. 4318 (1986). The temporary
regulation on cafeteria plans states in part:
Generally, for cafeteria plan years beginning on or
after January 1, 1985, a cafeteria plan is a written
plan under which participants may choose among two
or more benefits consisting of cash and certain
other permissible benefits . . . a cafeteria plan
may offer participants the opportunity to purchase,
with after-tax employee contributions, coverage
under a group-term life insurance plan (section 79),
coverage under an accident or health plan (section
105(e)), coverage under a qualified group legal
services plan (se:tion 120), or coverage under a
dependent care assistance program (section 129).
(Emphasis added).
The cafeteria plan described in Attorney General Opinion JM-143
(1984) allowed employees to choose between taxable and nontaxable
benefits. Under present Law, the cafeteria plan must offer the
employee a choice between cash and certain nontaxable benefits. Under
the quoted regulations, an employee's participation in a nontaxable
benefit offered in a cafeteria plan may be funded by a salary deduc-
tion. 26 C.F.R. 1I.125-2T; see 10 Thurgood Marshall L. Rev. 522, 532
(1985).
Article 3.50-3 of the Insurance Code requires state universities
to provide basic life, accident, and health insurance coverage to
employees. Ins. Code art. :1.50-3, 2(a)(b), 11. Standards for basic
coverage are developed by an administrative council established under
section 4 of the statute. Section 11 of article 3.50-3 provides that
each active full-time employee shall be automatically protected by a
basic plan of insurance coverage, unless he waives basic coverage or
chooses optional coverage. Section 11 makes the following provision
for premium payments:
If the cost of an active employee's basic coverage
exceeds the amount: appropriated by the legislature
for an employee, the institution must providep. 2502
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Texas. Attorney-General's Office. Texas Attorney General Opinion: JM-543, text, September 12, 1986; (https://texashistory.unt.edu/ark:/67531/metapth272983/m1/3/: accessed May 8, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Government Documents Department.