CAFETERIA PLANS OFFER TAX SAVINGS FOR EMPLOYERS AND EMPLOYEES.
Cafeteria plans fall under Section 125 of the IRS code and allow a menu of qualifying benefits to be offered to employees on a pre-tax basis. In the same way that you’d find a burger and fries on a menu in a cafeteria, you’d find benefits such as health insurance and disability insurance on a menu of “qualifying” employee benefits, hence the name cafeteria plan. The incentive to the employer for implementing a Section 125 plan is tax savings of 7.65% and approximately 30% (more or less depending upon tax rate) for participating employees. That’s a huge saving and really makes the case for every employer to establish a 125 plan. We help our clients establish Section 125 cafeteria plans as a free service.
Often used for health insurance contributions, supplemental insurance, flexible spending accounts, transit or child care, cafeteria plans can be structured to include those employee benefits that are most requested by your employees.
Employers benefit by adding a cafeteria plan to their benefits package through savings from reduced FICA, FUTA, SUTA and Workers’ Compensation taxes. These savings are often enough to pay for the costs associated with offering these employee benefits. As a side note, employee satisfaction and morale are often increased, because employees equate a cafeteria plan as being both a benefit and a type of raise.
Want to learn more about cafeteria plans? Have questions for our health insurance consultants and benefits advisors? Contact a Sensible Benefits advisor today! We’d be happy to fully explain cafeteria plans and their advantages in a personal consultation scheduled at your convenience.