1. What is a Cafeteria Plan?

A Cafeteria Plan, also known as Flexible Spendings Account (FSA), is a voluntary plan established by your employer. This plan allows you to select various employee benefits that will be paid on a non-taxable basis.

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1a. What is a Flexible Spendings Account (FSA)?

Another term for a Cafeteria Plan, see above.

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2. How does the Cafeteria Plan work?

Once each year you make a decision to redirect part of your income through your employer's Cafeteria Plan to pay for your medical and child care expenses before taxation. This election is irrevocable during the Plan Year, and can only be changed if there is a change in family status, employment, or a change in a spouse's employment.

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3. What do you mean by non-taxable basis?

Presently, you may be paying for a variety of medical expenses from your take-home pay that are not covered by health insurance. This plan will allow you to pay for those expenses with before tax dollars and allows you to pay childcare expenses with before tax dollars.

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4. How do these items become non-taxable?

By redirecting your taxable income, your employer pays these items through a reimbursement method before the government takes the taxes out of your paycheck.

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5. What advantage is this to me?

The biggest advantage is the tax savings. Since a Cafeteria Plan uses pre-tax dollars for reimbursement of otherwise after-tax expenses, employees reduce their Social Security, Federal, and State income tax by reducing their taxable income and thus their taxes. In other words, the more employees use the Cafeteria Plan, the lower their tax base and the greater their tax savings.

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6. Can your employer's stop this plan at any time and what would happen to me in that event?

Yes, your employer can stop the plan and if this did happen, you would revert back to your original taxable income and tax status.

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7. If I redirect a portion of my taxable income, will I make less money?

No, in all cases your take-home pay will remain the same. In addition, an Insurance/Tax Deferred accumulation plan will be established for you. That Tax Deferred accumulation plan will substantially increase your retirement benefit.

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8. What if I do not use all the money allocated to a benefit?

In each counseling session, we help the individual to estimate their allowable expenses for the coming year. This will help avoid unused benefits at the end of the year.

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9. Are there any negatives that I should know about?

Yes, because you are not paying Social Security Tax on that portion of your income that has been redirected, your Social Security Benefits could be slightly reduced. However, by placing the tax savings into an individual Insurance/Tax Deferred accumulation plan you will substantially increase your personal retirement benefits. A counselor will explain this benefit improvement to you.

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10. When I apply for credit, what take-home pay do I show on the credit application?

You show your take-home pay before your Cafeteria Plan was put in place.

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11. What pay figure is used to calculate retirement contributions to qualified pension or profit sharing plans, 401k Plans, and IRA's?

Your pre-Cafeteria Plan pay is used as the basis for these contributions.

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12. If I join the plan, will someone be available to review the plan periodically with me?

Yes, a counselor will be available to review your plan at least once each year and adjust the amount of taxable income you are redirecting to your various benefits.

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13. Give me some samples of "allowable expenses" under the Cafeteria Plan?

Dental insurance, Chiropractor, Dental Care, Therapy treatment, Oral surgery, Physician, Eye care, Eye Glasses, Hospital bills, X-Rays, Gynecologist, Ambulance Hire, Birth control pills, Nurse, Physical Examination, Nursing care, Laboratory, Prescription drugs, Medical Premiums, ChildCare, Weight Loss programs.

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14. Is this a new Concept?

No, it has been available since 1978 and has been utilized by many large companies such as Pepsi Cola, General Motors, Quaker Oats, Mariott Hotels and many other firms. Only recently has this concept been redesigned to function properly in small companies, giving the employees of those small companies the same benefits available to the employees of larger companies.

Any individual questions about your program will be answered at your annual personal program review with a Bentley, Yates counselor, or you may call Bentley, Yates and company at (972) 680-3394.

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