With health care expenses and child care costs skyrocketing, your employees really need to get the most out of their paychecks. It’s getting harder and harder to maintain the value we once received from our money. Employers who introduce a Cafeteria Plan discover the administration costs of the plan are typically offset by a reduction in the company’s tax and FICA match liability.
Implementing a Section 125 Cafeteria Plan will strengthen your benefits program, save your company FICA taxes, and save participating employees 25% to 40% in taxes (depending on their income tax bracket)…This translates into a 25-40% savings on expenses the employees already have. An employee that is paying $5000 a year for child daycare can easily save over $1500.00 per year in taxes and the company will save over $380 on that one account for one employee.
A flexible benefits plan is a plan that truly benefits both the employer and the employee. There are very few true win-win situations in life and this can be one of them – with proper management and administration. Here both the employer and the employee save valuable tax dollars which would otherwise be sent straight to Uncle Sam. A Flexible Spending Account (FSA) is also commonly called a Cafeteria Plan, or a Section 125 Plan.
Non-Insured Medical Expenses? They’re covered
Now employees can pay both insured and non-insured benefits with tax-free money. The range of expenses is broad, including:
- Over-the-counter medications
- Prescription medications
- Co-insurance, co-pays, and deductibles
- Some alternative medical care fees, such as Massage therapy or acupuncture (when used to treat pain or disease, not for general health or relaxation)
- Medical equipment, supplies and gases (like Oxygen)
Click here for a more complete list.
- If a participant’s spouse or dependent is not on the company insurance policy, the employee can still run their medical and work related dependent care expenses through the FSA plans!
Dependent Care Expenses? They’re covered too!
If an employee pays someone to care for their dependent while the employee is at work – those expenses can be paid for pre-tax as well.*
These expenses can include:
- Daycare for children prior to starting Kindergarten
- Aftercare and before-care for school-age children under 13
- School vacation days
- Teacher Planning Days or early release days
- Summer day camp (not sleep-away camps)
- Elder care
- And more – click here for more on Dependent care accounts and eligible expenses.
* If the employee is married, both the employee and spouse must be gainfully employed, or actively searching for employment.