Employees may be eligible to participate in the Cafeteria Plan (Section 125) and under IRS regulations, must either accept or reject this benefit. This plan enables eligible employees to pay certain insurance premiums on a pre-tax basis (i.e. disability, accidental death and dismemberment, cancer, dental and additional term life insurance.) A third-party administrator handles employee claims made on these accounts.
New employees must accept or reject this benefit during their first month of employment. All employees must accept or reject this benefit on an annual basis during the specified time period.
Through a Cafeteria Plan, an employee can customize his/her benefits package based on their individual priorities. In the broadest sense, a cafeteria plan allows an employee to choose between benefits, which are funded by employee dollars.
A participant cannot make any changes in their account(s) during the year unless the participant terminates employment, gets married, has a child, or has a death in the immediate family.
Premium contributions are automatically deducted from employee salaries before taxes are taken out. Because their taxable income is reduced by the amount they contribute, employees pay less tax on the money they earn. Employees see a savings in their FICA, federal income taxes.