March 13, 2008

Cafeteria plans good for employee and employer

Employee Advantages:

A Section 125 plan, also known as a flexible spending plan or cafeteria plan provide employee’s the opportunity to set aside pre-tax dollars to pay for a variety of expenses, including healthcare benefits, dependent care or medical expenses. Contributions toward plans are not subject to federal, state, or social security taxes. The contributions are placed into an account the employee can use to pay for allowed expenses.

Employer Advantages:

FICA Contribution Savings - Since the employees' contributions are not subject to social security tax (FICA), the employer does not have to pay its matching contribution either. Thus, your business can save 7.65 cents for every dollar contributed.

Workers' Compensation Premium Savings - Since, depending on your state, workers' compensation premiums are set by size of payroll, the employer's payroll is reduced by every contribution resulting in lower workers' compensation premiums.For more information about how a Section 125 plan may benefit your company, contact QuoteBroker.