What Is a Cafeteria Plan?
Savings Example 1- Employee
The $1,000 Solution
$25 Tax Savings!
Cafeteria plans don't only benefit employees. They may also benefit the employers who offer employee benefits under Section 125. Employers are required by law to pay FICA taxes equal to the amount that their employees pay each year. By instituting a cafeteria plan that saves employee tax dollars, employers may also save on FICA taxes.
Savings Example 2 - Employer
Employer FICA Savings
(The employer has 25 employees, each with an annual salary of $20,000
and insurance premiums of $100 per month)
What You Receive
You'll find that we're always looking for new ways to help you support your people. We're proactive in our approach to defining and meeting our customers' needs; often we're there with a solution well before you have a need for it. That's why when you sign up for our cafeteria plan, we offer the following products and services free of charge:
Cafeteria Plan Packet
The Cafeteria Plan Packet is consolidated information for Administrators of Section 125 Cafeteria Plans and Flexible Spending Accounts (FSAs) and consists of the following:
- Flex One® Account Establishment & Information Checklist - A checklist to help the plan administrator understand the employer's responsibilities in establishing and administering the cafeteria plan.
- Sample Cafeteria Plan Document - A separate, written sample plan document for a Section 125 Cafeteria Plan that outlines the plan's features, benefit information, eligibility rules, election information, plan year dates, and other information required by the IRS.
- Privacy Packet - Consolidated information, including a sample privacy notice, statement of the Flex One® Privacy Practices, and Sample Business Associate Contract, provided by Aflac outlining the plan administrator's responsibilities regarding federal privacy regulations (e.g., HIPAA and GLB).
- Summary Plan Description (SPD) - A section of the sample plan document for a Section 125 Cafeteria Plan to be provided to employees, which provides details regarding the plan as required by IRS regulations, including irrevocability rules, enrollment and re-enrollment procedures, rules governing participation, and the potential impact on Social Security and other compensation-based benefits.
Notification of Changes to the Law
Aflac will notify cafeteria plan administrators of any changes affecting their cafeteria plan, and will include amended or update plan documents when applicable.
Nondiscrimination Testing
Upon request, we will provide assistance in conducting nondiscrimination tests to help ensure compliance of our customers' cafeteria plans with regulations.
A Guide to Using Your Cafeteria Plan
Once a benefits administrator receives the cafeteria plan packet, he or she should follow the steps listed below to ensure the new cafeteria plan's compliance with applicable regulations.
- Review the sample Cafeteria Plan Document, Privacy Packet, and SPD with the employer's attorney and/or tax advisor to determine if the documents need to be revised to fit the employer's specific needs for the cafeteria plan.
- Adopt the plan before the effective date (to adopt the plan, the plan administrator must sign the Employer's Acknowledgment), and keep the adopted Cafeteria Plan Document on file at all times.
NOTE: Remember, adopting a plan requires the same kind of documentation that an entity uses for other major business actions (i.e., corporations need to adopt the plan by a valid board resolution).
- Distribute the SPD to employees to tell them how the cafeteria plan works.
NOTE: Confirm that employees have already received separate SPDs for each of the benefits available under the cafeteria plan.
- Obtain signed election forms before the plan effective date through a local Aflac representative.
To find out more about Flex One® services, call 1-800-32-FLEX1 (1-800-323-5391) between 8 am and 7 pm EST. To enquire about other Aflac products and services, call 1-800-99-AFLAC (1-800-992-3522).
