Cafeteria Plans, also known as “Flexible Benefit Plans,” are made possible by Section 125 of the IRS code dealing with the tax-exempt status of certain employee benefits.
The bottom line is that employees can select a combination of benefits that best suit their individual needs and pay for them using pre-tax dollars.
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How Cafeteria Plans Benefit Your Company and its Employees
Customized Individual Coverage
Each employee has unique health insurance needs based on their age, marital status, family health history and a host of other factors.
By offering your workers a Cafeteria Plan, they can choose exactly the types of coverage that they need most – on either a pre-tax or post tax basis. Those choices may include:
- Health and accident benefits
- Adoption assistance
- Dependent care assistance
- Health savings accounts
- Group life and many other options
Pre-Tax Premiums save Employees Money
Because Section 125 Cafeteria Plans include benefits that are eligible to be paid for with pre-tax income, employee net income will be reduced as will their taxable income.
Lower Withholding Saves the Company Money
Because a Cafeteria Plan allows employees to pay for benefits with pre-tax income, their take-home pay – and therefore the amount of their government withholding- is reduced. The employer saves on taxes, too.
Improve Recruitment & Retention
As with every item in your employee benefit portfolio, generous benefit packages are a significant factor in recruiting and Retaining top-notch employees.
Contact Benefits Network today! Let us help you determine if a Cafeteria Plan is right for your business and your employees.