|
One of the employee benefit plans that let employees avail various benefits like group-term life insurance, dependent care assistance, etc. is the Cafeteria plan. Answers to a few questions related to this are provided below: Q. As a part of the 125 Cafeteria Plan, what are the benefits that an employee can avail?
IRS rules permits the following to be a part of the 125 cafeteria plan:
- Accident and health benefits (Archer Medical Savings Accounts or long-term care insurance are not included)
- Assistance with regards to adoption
- Assistance with regards to caring for the dependent
- Group-term life insurance coverage (this may involve expenses that one is not able to segregate from wages)
- Health Savings Accounts (HSAs). Premiums for long-term care insurance that can be considered or premiums for qualified long-term care services can be paid from the HAS distributions.
However, the following cannot be considered as a part 125 cafeteria plan:
• Archer MSAs (Archer Medical Savings Accounts)
• Athletic facilities
• De minimis (minimal) benefits
• Educational assistance
• Employee discounts
• Lodging on your business premises
• Meals
• Moving expense reimbursements
• No-additional-cost services
• Transportation (commuting) benefits
• Tuition reduction
• Working condition benefits
• Scholarships or fellowships Q. Consider a situation where one would want to include the annuity into an IRA and has asked the employer to provide a policy surrender form on numerous occasions. The individual had a policy with Americo Financial who misrepresented the annuity that was offered as a part of the cafeteria plan. Colleagues who were a part of the court case that was settled in their favor got back their money. The employer no longer offers an annuity plan under the cafeteria plan. How does one roll the annuity into an IRA?
Withdrawing annuity (that an employer contributed as a part of the salary reduction agreement) may be a possibility if any of the following events take place:
• The agreement with Americo is cancelled by the employer and it is transferred to another company
• One’s employment is terminated
Technically, funds contributed towards the annuity plan by an individual do not belong to him\her as long as the individual is still in employment. In order for the funds to be rolled into an IRA, one of the following events should take place:
• Employment has to be terminated
• The plan has to be terminated
• Divorce
• Death. Q. Consider a situation where one of the employees works for 40 hours a week, whereas another employee works for 32 hours. Can the same employer charge varying amounts towards health benefits based on the number of hours worked?
The law does not stipulate the amount that can be charged by employers as long as there is no workplace discrimination against employees with regard to gender, race, age, disability, national origin, or religion. If an organization does not follow a cafeteria plan or a variation of a percentage contribution plan; then employers normally tend to retain uniformity in the amount charged for similar benefits. Q. Under the IRS 125 plan, is there a limit on the maximum amount that can be set aside towards health care reimbursement, by a qualified employee, from his/her salary?
Each year, benefits up to $5,000.00 can be set aside from one’s gross income under the Dependent Care Assistance program. However, in the event of a married couple filing separate tax returns; the limit is lowered. Any amount spent above the limit is reported on the W-2 form. A flex spending cafeteria plan does not set a limit on the tax-free contributions. A lot of benefits are gained by employees through cafeteria plans. However, it is necessary for both employees and employers to know how these plans work. Employment lawyers can answer questions and clarify any doubts that you may have about these plans.
Related Articles -
cafeteria plan, what is a cafeteria plan, my cafeteria plan, cafeteria plan regulations, what is cafeteria plan, cafeteria plan rules, cafeteria plan,
| 
