Cafeteria Plans

Introduction

Advantages are a huge deal when annoying to settle on what business you desire to work for, salary is the most significant advantage but you should believe other advantages also. Several companies have an advantages package known as the cafeteria plan, this plan permits workers to pick from a group of advantages such as, medical, accident, disability, vision, dental and group term life insurance. There are advantages and disadvantages of a cafeteria plan for both the employer and for the worker, but over the entire cafeteria plan is one of the most significant packages employers can offer to its workers (Sheley, 25-28).

Discussion

Advantages to the employers for providing a cafeteria plans are to improve worker morale and to create a more challenging recruitment offer. This cafeteria plan also offers the employer way of getting a big tax break. The worker's don't pay as much taxes so the employer won't pay as much taxes (Leonard, 39-53). This is also a good way to keep valuable workers, because you offer an assortment of advantages. Also compromising advantage plans can help small employers offer necessary advantages in a way that helps ease rising rates (Sheley, 25-28).

Some advantages of a cafeteria plan are that it is an excellent way for the worker to pay fewer taxes by allowing a company to deduct the rate of certain eligible advantages before taxes. When existing health advantages are deducted from an worker's paycheck on a pre-tax basis, the worker's take home pay increases, allowing him or her to take advantage of additional supplemental insurance products at little to no additional rate, compared with the original salary prior to the cafeteria plan (Sheley, 25-28). In addition, it gives the workers the power to select the advantages that meet their individual needs.

Disadvantages for the worker to take part in a cafeteria plan are that newly hired workers should sign up for a segment 125 cafeteria plan within the initial 30-60 days of employment (Kleiner, 11-17). The only other time the worker can make changes is during the open enrollment because it works on a calendar year, so workers cannot add, drop or change advantage elections at any other time of the year, except in cases of life changing events (Sheley, 25-28). Such as change in family status, marriage, birth, divorce, or death or loss of employment.

You also have to believe this when making your decision, when you redirect taxable salary away from Social Security this could result in not having as much Social Security advantages at retirement. Since the employer bears, the entire rate of all tax-free advantages in a compromising advantage plan there is a cap on the total advantages any one worker might elect for a plan year (Hannah, 23-25).

A cafeteria-style advantages plan is one of the most valuable programs an employer can offer to its workers. This is a great tool that can be used to manage rising health care rates. A cafeteria plan defined by segment 125 of the IR code allows each worker ...