Cafeteria Plans
What is a Cafeteria Plan?
A cafeteria plan is a written plan in which employees can select qualifying benefits from a “menu” of choices. The plan is sometimes referred to as a Code Section 125 Plan.
Why have a Cafeteria Plan?
- You save money
- Your employees
save money
- You are able to provide a benefit to your employees for little cost to your company
How will my company benefit?
Section 125 of the Internal Revenue Code allows employees to pay for group insurance premiums, unreimbursed health care expenses, and qualified dependent care expenses with pre-tax dollars. Employers benefit because all employee dollars contributed through these plans are not subject to matching FICA contributions.
Illustration of Employer Savings
The savings are based on 20 employees sheltering $2,000 each on an annual basis:
| Annual Salary Sheltered | $
40,000 |
|
| FICA savings 7.65% of $40,000 | 3,060
|
|
| FUTA/SUTA Savings of Approx. 3% | 1,200
|
|
| Total Savings | $ 4,260 |
Who can participate in the Cafeteria Plan?
- All full-time employees.
- Under some circumstances,
certain part-time employees.
- Employees with
less than one year of employment may be restricted from participating.
- Employees under the age of 18 may be restricted from participating.
What benefits can my company include in a Cafeteria Plan?
All or any combination of the following:
Insurance premiums paid out of pocket by employees:
- health insurance premiums,
- dental and vision insurance premiums,
- disability and accident premiums, or
- supplemental insurance premiums, such as cancer.
Medical expenses not covered by insurance:
- insurance deductibles,
- co-payments on major medical claims,
- prescriptions, supplies, and equipment,
- examinations, or travel expenses.
Adult and child daycare expenses:
- costs to care for a dependent while an employee works, this applies to both children and elderly dependents.
Cooper Norman Plan Services Available:
|
Plan Design |
Plan Documentation and Forms |
|
Presentation to Employees |
Employer Reporting |
|
Compliance Testing |
Tax Form Filing |
|
Trust Account Administration |
Monthly Administration |
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