AZ USA: Saturday, August 11 - 2007
If you are not using a Cafeteria Plan...You are are losing Money!
Employer saves a minimum of
$.0765 per dollar that employee puts into plan.
Employee uses pre-tax dollars to pay for Medical Expenses
and Dependent Care
Most employers have been receiving large rate increases from their insurance providers because medical trend is over 10%. In many cases, the employer is forced to pass on the increase to employees. One good way to minimize rate increases is to start a Cafeteria Plan. A Cafeteria Plan allows employees to pay for their portion of premiums on a pre-tax basis. This lowers their taxable base, therefore decreasing federal, FICA and most state's taxes. Most employees (depending on their tax bracket) will see that a Cafeteria Plan saves them 15% to 39% of their cost of premiums. Not only does the employee save money but the employer sees an approximate 7.65% reduction in their FICA and other payroll taxes.
In addition to paying for premiums on a pre-tax basis, employees may set up Flexible Spending Accounts (FSAs) to pay for items not covered by an insurance plan (i.e. deductibles, copays, coinsurance, over the counter medication, etc.) and even dependent care expenses. It is a win-win situation; both the employer and employee save money in taxes.
COBRA Solutions offers software that assists employers with the administration of a Cafeteria Plan. We recommend you visit our website at www.cobrasolutions.com for further information and a free download on the Cafeteria Plan Manager. It is a great product that will pay for itself in the first few months and your savings will continue for years. To see what your firm may save by implementing a Cafeteria Plan, visit our site at www.cafeteriaplanmanager.com and click the "Potential Employer Savings link.