ForumsEmployee Benefits and Retirement Planning

Cafeteria Plans. Tell us more. You to find out what the rules are (as far as getting on one),
how they work, and what are the pros and cons.

What is a cafeteria plan? As its name suggests, a cafeteria plan allows
an employee to choose where his or her benefit dollars will be spent. The plan can provide
a number of selections, including medical, accident, disability, vision, dental and group
term life insurance. It can reimburse actual medical expenses. It can pay children’s
day care expenses. And, it does these things with pre-tax dollars. One thing to remember
is that these benefits must be funded with tomorrow’s earnings, not yesterday’s.
By that I mean, each person must estimate the costs that he or she will incur during the
plan’s upcoming year and request to have the estimated amount redirected from wages
into the plan.

LUCKIEST

Once again, I agree with everythng Lighthouse24 writes. However, there is a lot of margin for error on the employee medical FSA contributions. As a result of the substantial FICA, Federal and State tax savings on the EE contributions, most people would still be ahead if they over contributed by as much as 25% of their medical expenses. I think that the cost of undercontribution is greater than the risk of overcontribution.

Our company has a cafeteria (Section 125) plan administered by a payroll company. There are only 5 employees on the plan. Our employer pays half the insurance premium and the employee pays the other half. Is the reason why we have a cafeteria plan because the employee gets to use pre-tax dollars to allot this expense? If so, I've never had to complete any form forecasting the cost; shouldn't I be doing that?

Gosh, you learn something new everyday! From the subject heading, I thought this person was looking into a cafeteria business and wanted to know what is required as it relates to getting approval from the Board of Health regarding cleanliness and equipment and what would the dietary requirements be. LOL!