- Health insurance,
- Voluntary benefits premiums (like vision and dental),
- Life insurance,
- 401(k), and
- Flexible spending account.
Set-up and tax implicationsCafeteria plans are also called Section 125 plans because they were created by Section 125 of the IRS Code. When a plan is created, the benefits are available to employees, their spouses, and their dependents. Depending on the circumstances and details of the plan, Section 125 benefits may also extend to former employees, but the plan cannot exist primarily for them. Section 125 plans offer a number of tax-saving benefits for employers. For each participant in the plan, employers save on the Federal Insurance Contributions Act (FICA) tax, the Federal Unemployment Tax Act (FUTA) tax, the State Unemployment Tax Act (SUTA) tax, and workers’ compensation insurance premiums. Combined with the other tax savings, a Section 125 plan usually funds itself because the cost to open the plan is low. Also, it’s estimated that participating employees can save 20% to 40% of every dollar put into the plan. The employee chooses how much they want to put into the plan each year and this is deducted from their paycheck automatically for each payroll period. Remember: Flexible benefit plans are not without their drawbacks. But if you want to attract and retain key personnel with competitive benefit packages while keeping your own costs low, they can be an attractive alternative to standard benefit plans. Call us for more information on how you can set up a flexible benefit plan for your staff. There are several types of flexible benefit plans, including cafeteria plans and flexible spending accounts.
Flexible spending accountsAn FSA lets your employees pay for medical-related expenses and dependent care that may not be covered by their health plan. They can later use these funds to pay for an array of expenses such as:
- Out-of-pocket medical costs,
- Acupuncture, chiropractic services and the like,
- Medical equipment,
- Day-care provider fees,
- Elder care.