Why Set Up a Plan?
Employers have two reasons to offer a Cafeteria Plan
1. To offer a competitive valued employee benefit.
• Many employees understand the benefit and tax savings from a Cafeteria Plan.
• Having a Cafeteria will enhance a benefit package.
2. To save taxes
• Employees save the Federal, State and Social Security Taxes.
• Employers also save the matching social security and Medicare taxes.
• Employers may experience savings similar to the following:
Employer Tax Savings Example
Number of Employees 100
Plan Participants 90
Annual Medical Insurance Premiums $300
Total Contributions $27,000
Health Flexible Spending Account Participants 20
Annual Per Participant Contribution $1,200
Total Contributions $24,000
Dependent Care Flexible Spending Account Participants 5
Annual Per Participant Contribution $5,000
Total Contributions $25,000
Comprehensive Total Contributions $76,000
Matching Tax Savings 7.65%
Total Employer Tax Savings $5,814
Employers should note:
Employers may determine the maximum (or minimum) amounts employees may elect for the
FSA accounts (within applicable legislative rulings).
The health care portion of the FSA plan is prefunded, meaning the employees can access all
of their annual election at anytime.
If employees leave or are terminated during the plan year, the date of termination will be the
last day to incur expenses to claim remaining funds. Employees may claim all available funds if expenses were incurred during the time they were employed.
Employers cannot ask terminating employees to repay the difference in their year to date
contributions from year to date disbursements.
Employers cannot return forfeitures to employees.
Employees should know:
Your election cannot be changed during the plan year unless you have a Change of Status (you then have 30 days to adjust your FSA).
Money set aside in one account cannot be used to pay expenses in another.
Expenses must be incurred during the Plan year.
USE IT OR LOSE IT! Unused funds will be FORFEITED at the end of the plan year and run- out period.
Dependent care funds are only available as accrued pretax through each payroll deduction.
Only eligible items may be reimbursed under the plan. Cosmetic or general-use items are NOT eligible for reimbursement under the plan.