What are the benefits of a Cafeteria Plan?
Employee Benefits: It allows employees to reduce their gross taxable income, which results in an employee paying lower Federal, State and FICA taxes. The subsequent increase in take home pay can help employees pay for other desired voluntary benefits. Employer Benefits: As employees reduce their gross taxable income, the employer also saves money by paying less FICA, federal or state taxes (most states) on the reduced payroll base. The employer gets credit for increasing employee benefits while actually saving money. Saving Example for the Employee A married employee claiming one exemption and earning $2000 monthly with $200 deducted for fringe benefits. The Employee’s Benefit Deducions….
