What Is A Cafeteria Plan?

A cafeteria plan is a flexible savings account, and acts much like a Health Savings Account (HSA). As an employer, you will set up your cafeteria plan for employees to put money in their account before taxes just as an HSA does.

With their savings, employees can choose which benefits they want to spend their funds from a "menu." And you'll provide them the choices for their benefits. Here are some examples of what benefits you can offer your employees to choose from:

• Medical insurance
• Disability insurance
• Dental or Vision
• Term life insurance

They aren't exactly the same as HSAs though. An important aspect of cafeteria accounts is that the funds do not roll over from year to year — which means if you don't use the money, you lose what is in your account. So using a cafeteria account takes careful planning of your yearly expenses for insurance and medical costs.

What Are My Advantages As An Employer?

Besides offering your employees an extra benefit to help pay for insurance, you'll save on taxes as well. Because federal law says that you have to match any taxes that your employees pay — if they pay less tax, you pay less tax.

And administration costs won't threaten your bottom line either. When you look at the reductions in tax paid, the cafeteria plan can pay for itself.

The most important thing you should do is educate your employees on using their cafeteria plan. They should know how to manage their savings and what to expect out of the plan. And if you need to find out more, our professional agents can answer any questions you have. With our free quote service, you can get expert advice and explore your options.