Why Create a Cafeteria Plan?
Quite simply, tax advantages accrue for both the employee and employer! In essence, employees reduce their income by an amount equal to the cost of the benefit. By reducing their income, they lower their taxable base; thereby reducing the amount they pay in Federal, FICA and (in most States) State income taxes. Conversely, when employees’ taxable income is reduced, FICA and FUTA payroll taxes paid by employers are also reduced. With the implementation of a Cafeteria Plan and utilizing the Cafeteria Plan Manager, most employers tax savings pay the software in the first month of operation.
What Kind of Savings Should and Employer Expect?
With employees below the Social Security withholdings threshold, an employer will be saving a minimum of $.0765 for every dollar an employee reduces their income. For example, an employer with fifty employees who each elect to reduce their income by $1,500 per year (to pay for benefits on a pre-tax basis) would actually save the employer over (50 X $1,500 X $.0765) $5,700 in the first year. With an average employee tax savings of 25%, the same employee would be saving over $350 in the cost of their benefits. Finally, a WIN-WIN situation for the employee and employer!
What are the Components of a Cafeteria Plan?
There are three main components of a Cafeteria Plan that can be implemented separately or in combination. The employer decides which components to include in their Cafeteria Plan. The three most common components are:
➤ Premium Reduction Plan: A Premium Reduction Plan is the cornerstone of a Cafeteria Plan because it offers a benefit to virtually all employees and is the easiest to administer. Under a Premium Reduction Plan, employees elect to reduce their income by an amount equal to their cost for benefits. Then, the employer pays for 100% of the benefit.
➤ Medical Reimbursement Plan: A Medical Reimbursement Plan allows employees to create an account to pay for benefits not covered under the insurance plan (i.e. deductibles, coinsurance and copayments). At the beginning of each plan year, employees decide what amount they want to contribute to the plan. As expenses are incurred, the employee submits eligible receipts to the Plan Administrator and is reimbursed with untaxed dollars.
➤ Dependent Care Reimbursement Plan: A Dependent Care Reimbursement Plan allows employees to pay for eligible dependent care expenses (such as child daycare) on a pretax basis. Similar to the Medical Reimbursement Plan, employees decide each year how much they want to contribute through payroll reductions to their account. As expenses are incurred, receipts are submitted and reimbursed by the company to the employee with untaxed dollars.
How can I establish a Cafeteria Plan?
Now your company can easily create and administer a Cafeteria Plan with COBRA Solutions’ Cafeteria Plan Manager! The software was designed to assist with the implementation of one or more of the Cafeteria Plan components and track, calculate and record employee’s benefit elections. Plan Documents, SPDs, Enrollment Forms are provided and the software keeps track of employee's accounts.
Easy to use, monitors employee reductions and reimbursements, offers a proven track record, affordable price - these are just a few of the reasons you should own the Cafeteria Plan Manager. For further information, please review the program's features.
How can I be sure that my software is up-to date with the latest Regulations?
COBRA Solutions is always monitoring the laws as they relate to Cafeteria Plans and provides updates to customers that subscribe to the "Annual Maintenance Agreement."
How many concurrent users can have access to the software?
The program can handle up to five(5) concurrent users entering and retrieving data at the same time.
Can the software be networked?
Yes, you can network the software by installing the program files to the server and then installing the System files to each workstation. (note: you can install the system files to as many workstation as needed.)
How many Company / Groups can be entered into the Cafeteria Plan Manager?
You can add as many as 999 Company/Groups into the Cafeteria Plan Manager.
Is there a limit to the number of members we can enter into the system?
You are limited to 32,000 employees but there are solutions by creating a new company to handle the additional employees.
How does your system handle imports and exports?
You may import both employee information and receipts for medical/dependent care FSAs. The import of employee data can be done by creating an ASCII file with fifteen fields separated by semicolons. The receipt information is a specialty product whereby employees may enter receipts via the internet and the system imports the file, eliminating data entry.
Does the software offer a warranty?
Yes, we offer a "money back guarantee" if you are not completely satisfied with the software. You may return the CD within sixty days from the date of purchase for reimbursement. Units purchased through a third-party vender must follow the policies of that vender.
Does COBRA Solutions accept legal responsibility for any Cafeteria Plan noncompliance issues if we purchase the software?
No, Cafeteria Plans are an employer plan and no one may pass on the responsibilities. We our proud to say that over the past six years, there are no know legal issues with companies utilizing our product. As always, we recommend you have your attorneys review the documents if you are uncomfortable with the notifications.
Do I need training to operate the software?
No, the program has been developed so most users can run the entire program within a few days. If you ever have questions, you may call for technical support.