Section 125 Cafeteria Plans
Employees Reduce Taxable Income
A Cafeteria Plan allows employees to pay for certain costs on a pre-tax basis.
Allowable group insurance premiums include those paid for:
Vision care insurance,
Group life insurance for coverage up to $50,000 per employee,
Disability income insurance,
Also, employees can pay for otherwise non-reimbursed health care costs and day care costs by participating in a Heath Care Flexible Spending Account and a Day Care Flexible Spending Account.
Employees can decrease their federal and state income taxes as well as Social Security and Medicare taxes. Savings usually range from 25 percent to 45 percent of pre-tax contributions depending upon an employee’s actual tax rates.
Employers Reap Tax Savings Benefits
Employer tax savings can be as much as 7.65 percent of employee pre-tax contributions as a result of decreased Social Security and Medicare wages. These savings usually equal or exceed any design and administration costs.
In order to establish a Section 125 Cafeteria Plan, a written Plan Document, a Summary Plan Description, and other administration forms are required. We can do this for you.
Non-Discrimination testing also must be performed to demonstrate that the Plan does not discriminate in favor of Highly Compensated and Key employees.
Call us to let us help you set this up and offer these tax savings to you and your employees.