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There are three elements to a Cafeteria Plan:
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insurance premium,
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unirembursed medical expense and dependent care expense.
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A Cafeteria Plan may include any combination of these three items.
The benefit of a Cafeteria Plan allows employees to pay insurance premiums, medical expense and dependent care expense pre-tax. An employee’s take home pay increases. Employers save the Social Security match (7.65%) on the dollars employees pay through a Cafeteria Plan.
The Susan Posada Agency will do the feasibility study, plan design and provide resources for documentation and administration.
Cafeteria plans are known by several names:
Premium Only Plan (POP) A Premium Only Plan allows employees to pay insurance premiums pre-tax.
Section 125 Plan A Section 125 Plan is a generic term that may describe either a POP or Cafeteria Plan.
Cafeteria Plan A Cafeteria Plan includes a POP and flexible spending accounts (FSA).
No matter what you call it, it allows employees to pay certain expenses with pre-tax dollars, thus increasing their take-home pay. Because these expenses are paid pre-tax the employer saves the FICA match on the fund paid through a Cafeteria Plan.
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