At the Allday Consulting Group, our Financial Advisors can help reduce the burden of rising health insurance costs and the cost of day care, by having Uncle Sam pick up part of the cost.We can help your employees reduce the cost of day care by having Uncle Sam pick up part of the cost. This is done by way of using “pre-tax” payroll deductions for health insurance and day care expenses. This “tax-shelter” is known as a Section 125 Cafeteria Plan (named after section 125 of the Internal Revenue Service Code). Cafeteria plans are also referred to by many names including flexible spending accounts (FSAs), choice spending accounts, section 125 plans, and/or reimbursement accounts.

A Cafeteria Plan is a pre-tax fringe benefit that enables both the employer and the employee to purchase health care and day care on a pre-tax basis, thus reducing their total costs for benefits. Implementing a Cafeteria Plan will save both your company and your employees money while providing a convenient way to pay for certain expenses with before-tax dollars.

Because of rising health care costs, many employers have had to shift the burden of these rising costs to the employee through higher deductibles and co-payments. Implementing a Cafeteria Plan will help re-coup some of the higher deductibles and co-pays.

With a Cafeteria Plan in place, an employee is allowed to pay for his/her group health premiums, and other insurance (such as disability and long-term care), unreimbursed medical costs (such as prescriptions and co-pays), child and dependent care costs and more….. all with tax-free dollars.

A Cafeteria Plan will allow your employees to save social security (FICA), federal, and state taxes while immediately saving you, the employer, social security (FICA), federal unemployment taxes (FUTA), state unemployment taxes (SUTA), and workers compensation taxes. A cafeteria plan is a win-win situation for both the employer and employees.

Here is an example of how a Cafeteria Plan can save taxes for you and your employees:

• Health Insurance Premiums
  
  
• Out-of-Pocket Medical Expenses, such as deductibles, co-payments, prescriptions and other costs that are not paid for by health insurance
  
  
• Dependant Care
  
  
• Disability Insurance
  
  
• Long Term Care Insurance

• What are the benefits of a cafeteria plan?
  
  
• Who can establish a cafeteria plan?
  
  
• Who can participate in a cafeteria plan?
  
  
• What are the tax advantages?
  
  
• What are the costs for setting up and maintaining a cafeteria plan?

• Reduces Your Company’s Payroll Tax Burden — You'll reduce your company’s matching Social Security and Medicare taxes. You’ll also lower the amount you pay for workers compensation insurance, federal unemployment taxes (FUTA), and state unemployment taxes. This total savings usually amounts to more than 10% for every dollar your employees run through the cafeteria plan.
  
  
• Improves Your Total Benefits Package — Offering a cafeteria plan to your employees will give your company a “competitive-edge”. It will provide your existing employees and new recruits a more complete benefits package. This will improve employee morale, reduce employee turnover and attract more qualified employees to your company.
  
  
• Increases Employee “Take-Home” Pay While Reducing You Overhead Costs – Due to the way the tax laws are currently structured, most employees are not able to deduct the cost of health care, doctor visits, hospital stays, prescriptions, dental care, dependent care, disability insurance or insurance for long-term care. A cafeteria plan will allow your employees to “pass-on” a big part of these to Uncle Sam. This is accomplished by providing your employees with a means by which they can pay for these expenses on a “Pre-Tax” basis.
  
  
• Peace of Mind — By offering a cafeteria plan to your employees, you’ll have “Peace-of-Mind” by knowing that you are giving your employees a “much-appreciated” benefits package. And, by hiring a professional firm to handle the cafeteria plan administration, you'll have the piece of mind in knowing that your company is compliant with the IRS regulations.

• Self-employed individuals (but they can establish a plan for their employees)
  
  
• Partners in a partnership (but the partnership can establish a plan for their employees)
  
  
• An owner of an “S-Corporation” who has more than a 2% ownership interest.
  
  
• Owners of a “C-Corporation” can participate in a cafeteria plan but cannot contribute more than 25% of the total contributions in the plan.