Get Employer Cafeteria Plan Salary Redirection/reduction Agreement

One of the main benefits of a cafeteria plan is the fact that it lowers your tax liability. By making pre-tax contributions to the plan, you reduce your gross income. Payroll taxes are deducted based on gross income, so the lower it is, the less tax you pay.

Employer contributions to the cafeteria plan are usually made pursuant to salary reduction agreements between the employer and the employee in which the employee agrees to contribute a portion of his or her salary on a pre-tax basis to pay for the qualified benefits.

If the plan provides only taxable benefits, then it is not a cafeteria plan. The plan must offer employees a choice between at least one taxable benefit (e.g, cash) and one nontaxable benefit. If the plan provides only taxable benefits, then it is not a cafeteria plan.

What is a cafeteria plan? Cafeteria Plans are an employer-sponsored benefit that lets employees pay certain qualified medical expenses – such as health insurance premiums for medical, dental, and vision coverage – on a pre-tax basis.

What exactly is needed to qualify as a cafeteria plan? At least one taxable benefit option and one qualified pre-tax benefit. Qualified benefits include accident and health benefits, adoption assistance, dependent care assistance, group-term life insurance coverage or health savings account.

Salary Redirection Agreement means an agreement between the Participant and the Employer under which the Participant agrees to reduce his Compensation or to forego all or part of the increases in such Compensation and to have such amounts contributed by the Employer to the Plan on the Participant's behalf.

Here are four examples of cafeteria 125 healthcare benefits for employees: Premium-only plan (POP) With a POP plan, employees pay for their health insurance benefits with their pretax income. ... Health savings account (HSA) ... Flexible spending accounts (FSA) ... Dependent care assistance plan (DCAP)

A cafeteria plan is defined in § 125(d)(1) as a written plan maintained by an employer under which all participants are employees, and the participants may choose among two or more benefits consisting of cash and qualified benefits.