Cafeteria Plans

Whether you call them Section 125 Cafeteria Plans, Flexible Spending Accounts, or Flexible Benefit Plans, they all mean the same thing: a win-win tax savings plan for your company and your employees. Through the magic of pre-tax payroll deductions, these plans deliver significant savings - at little or no cost to you!

How it works–for everyone

Created through the Revenue Act of 1978, and governed by Internal Revenue Code Section 125, these Cafeteria Plans allow your employees to pay for certain eligible expenses with pre-tax dollars, instead of the after-tax dollars they currently use. While their gross pay remains the same, their taxable income is reduced, thus increasing their take-home pay.

As an employer, this reduces your taxable payroll; in fact, you save 7.65% (your FICA contribution) on every dollar your employees deduct (up to certain limits). What could be easier! And your Benefit Specialists of NY representative will take care of all the paperwork and employee education for you.

(If you are currently not requiring employees to contribute to the cost of their insurance, a Section 125 Cafeteria Plan allows you to do so with the least impact on employees.)

A choice of plans

Benefit Specialists offers three convenient plans for your employees to choose from, all of which allow employees to contribute (through payroll deduction) pre-tax dollars:

• Premium Conversion Account (see example), which is used to pay insurance premiums.
• Medical Reimbursement Account (see example), used to pay for unreimbursed medical expenses (deductibles, copayments, dental, and so on). This involves estimating their annual out-of-pocket unreimbursed expenses.
• Dependent Care Account (see example), which lets employees deduct eligible dependent care expenses (children under 13 and elderly parents they claim as dependents). There are certain limits and restrictions that can be discussed by your Benefit Specialists representative.

Sample of eligible medical expenses.

For medical reimbursement and dependant care accounts, employees will need to submit a claim form with receipts for reimbursement from their pre-tax funds. The check is mailed directly to the employee.

Please contact a Benefit Specialists of NY representative today to get all the details, forms, examples of typical employee/employer savings, and other considerations you may want to evaluate before making a decision.