Section 125 - Cafeteria Plan
- Companies enjoy lower Social Security payroll taxes while increasing employee net income.
- Allows Employees to pay for medical insurance premiums, unreimbursed medical expenses including OTC drugs used to treat or alleviate personal injuries or sickness, and dependent care costs with "Before Tax Dollars".
- Win-Win opportunity for Employers and Employees.
Example: Employer and Employee Benifits from a Typical Cafeteria Section 125 Plan
| Employee | Without Plan | With Plan | Increase |
| Gross Monthly Pay | $2,500.00 | $2,500.00 | |
| Medical Insurance Premiums | $0.00 | ($100.00) | |
| Unreimbursed Medical Expenses | $0.00 | ($100.00) | |
| Dependent Care | $0.00 | ($300.00) | |
| Taxable Income | $2,500.00 | $2,000.00 | |
| Federal Income Tax(20%) | ($500.00) | ($400.00) | |
| State Income Tax(5%) | ($125.00) | ($100.00) | |
| Social Security Tax(7.65%) | ($191.25) | ($153.00) | |
| Medical Insurance Premiums | ($100.00) | $0.00 | |
| Unreimbursed Medical Expenses | ($100.00) | $0.00 | |
| Dependent Care | ($300.00) | $0.00 | |
| Net Paycheck | $1,183.75 | $1,347.00 | $163.25(13.8%) |
| Employer | Without Plan | With Plan | Savings |
| Social Security Tax | ($191.25) | ($153.00) | $38.25 |
| X 12(months) | |||
| Net Annual Savings per participant | $459.00 | ||
| Annual Savings (based on 5 participants) | $2,295.00 |
-News Flash
Deposit date for 401(k) Deferrals
2/28/2008 - The DOL announced today that it is proposing an amendment to participant contribution rules of small plans (under 100 participants). The amendment would provide a safe harbor period under which amounts deposited to the plan within seven business days of withholding would be deemed to be in compliance.
For Employers that have been using the 15 day rule, we would advise that you make the necessary changes immediately to fall within the 7 days period.
2008 Limits
11/2/2006 - New 2008 Limits have been released! See Policies for the most up-to-date information! Link to Policies
DOL issues USERRA Notice Final Regulations January 18, 2006
1/19/2006 - The DOL has issued final regulations on the USERRA Notice. Did you know that Employers MUST provide notice?Link to the DOL to download the newest poster text in order to be in technical compliance with the final regulations.
Bond Coverage
11/17/2005 - Did you know your plan must be covered by a Fidelity Bond in the amount of 10% of the plan assets? Contact us for more information!
Loan Interest
11/17/2005 - Loan Interest Rate for August 2008 is 4.26%
Deduct OTC Medicines
9/27/2005 - Did you know that Over the Counter (OTC) medicines can be deducted in your Flex plan? Link to Cafeteria
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