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. What advantage is this to the employer?

The advantages to you, the employer, are numerous. First, there is a significant saving in your payroll costs. When your employees reduce their taxable income, you will have the benefits of lower matching FICA cost. In addition, your Workers' Compensation premiums are reduced for the same reason, namely a reduction in your employees' salary. This benefit not only reduces their taxes and increases their take-home pay, but also increases your bottom line profit at the same time! You will find the cost to install the plan to be significantly less than the savings you realize. Normal installation costs run about 35% of first year's savings. No installation cost during later years.

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3. How does the Cafeteria Plan work?

Once a year, your employees make a decision to redirect a portion of their income through the Cafeteria Plan to pay for their eligible medical and child care expenses before taxes. This election is irrevocable during the Plan Year and can only be changed if there is a change in an employee's family status, employment, or change in a spouse's employment.

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4. Will I get involved in a lot of new administration?

No, you will not. Bentley, Yates will do all your administrative work. You will receive a monthly listing of what reimbursements each employee should receive. The plan money will always stay under your control in your bank.

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5. How do these items become non-taxable?

By redirecting a portion of their taxable income, you the employer pay these items for them through a reimbursement method before the government takes the taxes out of their paychecks.

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6. As an employer, can I stop this plan when I choose?

Yes, you can stop the plan when you choose and if this does happen, your employees would revert to their original taxable income and tax status.

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7. What advantages do my employees realize?

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 taxes by reducing their taxable incomes, and thus their taxes. In other words, the more your employees use the Cafeteria Plan, the lower their tax base and the greater their tax savings.

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8. 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, Marriott Hotels and many other firms. Only recently has this concept been redesigned to function properly in small and medium sized companies, giving your employees the same benefits available to the employees of larger corporations.

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9. What is meant by non-taxable basis in question one?

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

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