VBSR's Cafeteria Plan is one of the most cost-effective benefits we offer to members.
What is a Cafeteria Plan?
A Cafeteria Plan lets employees use pre-tax dollars for benefits they choose. Since it is pre-tax, it saves both employees and employers money. Although different companies administer their plans a little differently, a Cafeteria Plan basically works like this:
- Participating employees choose to have a certain amount of money withheld from their paychecks, pre-tax.
- That money gets placed into a holding account (generally not a real cash account).
- Employees get reimbursed from that account for approved expenses, such as certain medical expenses and child or elder care.
As a result,
- Employees don't pay taxes on approved expenses, and so save on state and federal income tax and social security tax, and
- Employers save on the matching social security tax and on unemployment tax.
Cafeteria plans are relatively easy to administer, but to set them up you need a comprehensive set of IRS-approved forms and informational sheets. VBSR provides these as a service to members for $150, with an additional charge only when occasional updates are issued. Recent changes in the law have somewhat relaxed the rules for reporting expenses and claiming reimbursements.