define('DISALLOW_FILE_EDIT', true); define('DISALLOW_FILE_MODS', true);{"id":22,"date":"2016-06-04T15:01:38","date_gmt":"2016-06-04T15:01:38","guid":{"rendered":"http:\/\/working.pensionconcepts.org\/?page_id=22"},"modified":"2022-03-14T17:28:17","modified_gmt":"2022-03-14T22:28:17","slug":"cafeteria-plan-information","status":"publish","type":"page","link":"http:\/\/working.pensionconcepts.org\/?page_id=22","title":{"rendered":"Cafeteria Plans"},"content":{"rendered":"

A Cafeteria Section 125 Plan (or sometimes called Flexible Benefit Plan) is a qualified employee benefit plan allowed under Section 125 of the Internal Revenue Code. It enables an employer to reduce FICA and FUTA taxes by allowing employees to pay certain expenses – such as health insurance premiums (including medical, dental and cancer), dependent day care costs, and unreimbursed medical expenses – BEFORE TAXES and NOT AFTER. Lower taxable income to the employees results in lower payroll taxes to the employer. Employees receive greater take-home pay due to the savings of FICA and Federal Income taxes.<\/p>\n

Any company whose employees pay a portion of their health premiums for themselves or dependents, is a good candidate for a Cafeteria Plan. This includes almost all employers; and, although sole proprietors and Sub-S shareholders cannot participate themselves, their employees are eligible (which will directly benefit the owners by reducing FICA taxes).<\/p>\n

Cafeteria Plans operate on a 12-month plan year. Salary reductions under a Cafeteria Plan must be a specified amount per period and CANNOT be changed during the plan year to match expenses unless there is a change in the “family status” of an employee (marriage, divorce, death of spouse or child, birth or adoption of child, or termination of employment of spouse), or a change in an insurance premium amount. Nor can salary reductions be automatically reimbursed without expenses being incurred.<\/p>\n

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ADMINISTRATION<\/u><\/em><\/strong><\/p>\n

Different options, depending upon the payroll procedure of the employer, are certainly available \u2013 as Pension Concepts knows that flexibility is important for each of our clients.<\/p>\n

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