Cafeteria Business Plan

Cafeteria Business Plan-3
With respect to supplemental benefits, a common plan design is a Premium-Only Plan (POP), through which employees pay for the premium through pretax salary reduction.

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That means many people are unaware the plan even exists.

But utilizing the tax code for your business can be an incredible way to enhance your employee benefits package, while simultaneously boosting your margins.

These plans are governed by section 125 of the Internal Revenue Code and for this reason are also sometimes referred to as “section 125 plans.” Section 125 imposes a number of different compliance requirements, such as a written plan document and irrevocable elections, in exchange for this favorable tax treatment.

Many states, excluding New Jersey and Puerto Rico, provide similar tax benefits as the federal tax rules.

Aflac herein means American Family Life Assurance Company of Columbus and American Family Life Assurance Company of New York.

One of the most underrated and underused employee benefits available for small businesses today is outlined in section 125 of the U. Because these benefits are free from federal and state income taxes, an employee's taxable income is reduced, which increases the percentage of their take-home pay.

A section 125 or "cafeteria" plan allows employees to withhold a portion of their pre-tax salary to cover certain medical or child-care expenses.

And because the pre-tax benefits aren't subject to federal social security withholding taxes, employers win by not having to pay FICA--or workers' comp premiums--on those dollars.

When many employers hear the term “cafeteria plan,” they may think of arrangements with employer credits and complicated administration requirements.

In actuality, these plans are more prevalent than many may think.

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