When you sign up to work for a company, one of the first things you're likely to do is to enroll in your benefits plan. These employer-sponsored benefits are just some of the perks many companies offer their workers. They generally range from insurance benefits—medical, dental, and disability insurance coverage—to 澳洲幸运5开奖号码历史查询:retirement benefits, as well as those that can h🍸elp you out with life events like adoption assistance.

These options are collectively known as a 澳洲幸运5开奖号码历史查询:cafeteria plan. Despite the name, they have nothing to do with food. Instead, it's derived from the notion that employers allow employees to choose their benefits before any taxes are deducted—just like you would with a meal at a cafeteria. But before you choose, you should be aware of what this means for your 澳洲幸运5开奖号码历史查询:bottom line.

Read on to find out whether cafeteria plans are subject to the 澳洲幸运5开奖号码历史查询🥂:Employee Ret💝irement Income Security Act (ERISA), 澳洲幸运5开奖号码历史查询:Federal Insurance Contributions Act (FICA), and 澳洲幸运5开奖号码历史查询:Federal Unemployment Tax Act (FUTA), and how.

What Is a Cafeteria Plan?

Cafeteria plans are employer-sponsored benefit plans that provide employees with different pretax benefits, both taxable and nontaxable. These plans, which are typically more flexible than others, are also referred to as flexible benefit plans or 澳洲幸运5开奖号码历史查询:Section 125 plans.

According to the 澳洲幸运5开奖号码历史查询:Internal Revenue Service (IRS), participants must be able to choose at least one option from a cafeteria plan. Options for cafeteria plans may include 澳洲幸运5开奖号码历史查询:health savings accounts 🌱(HSAs), adoption assistance, group life insurance, and cash benefits.

If an employee takes nontaxable benefits, they won't be subject to any federal 澳洲幸运5开奖号码历史查询:income taxes. But they do kick in if plan participants choose taxable benefits like cash. Employees may, therefore, be subject to FICA and FUTA taxes.

The benefit amount is subject to all the same income and 澳洲幸运5开奖号码历史查询:payroll taxes that apply to wages. Though less common than 401(k) plans offered by many employers, cafeteria plans are still covered under the ERISA and are subject to the same regulations as other qualified plans.

Cafeteria Plans and ERISA

The Employee Retirement Income Security Act of 1974 provides protection to investors and their retirement accounts. It ensures individuals and institutions that administer qualified plans do not misuse the assets. They are also responsible to keep plan participants informed about any changes and plan features at no charge.

ERISA also sets up minimum standards including vesting periods, funding, and benefit accrual. The act also provides a number of protections for cafeteria plan benefits, including the preemption of state 澳洲幸运5开奖号码历史查询:escheatment laws. These are laws that require financial institutions to report inactiv🌞ity to the state.

Because cafeteria plans are covered under ERISA, they are subject to the same documentation, reporting, and administration requirements as all other ERISA plans. These include 401(k), 401(a), and 403(b) plans, simplified employee pension (SEP) plans, and 澳洲幸运5开奖号码历史查询:profit-sharing plans. ERISA requires all participating employees to be provided with a summary plan description within 90 days of plan enrollment. This document must also be filed with the Department of Labor.

Cafeteria Plans and FICA

澳洲幸运5开奖号码历史查询:Social Security and Medicare payroll taxes are collectively referred to as the Federal Insurance Contributions Act. This act mandates employers to contribute directly to and to make 澳洲幸运5开奖号码历史查询:deductions from employee payroll to fund both programs.

In general, qualified cafeteria plan benefits are not subject to FICA or other taxes. However, FICA taxes still apply to certain benefits. For example, 澳洲幸运5开奖号码历史查询:group term life insurance benefits that exceed $50,000 are subject to Social Security and Medicare withholding, as are adoption assistance benefits.

Cafeteria Plans and FUTA

The federal 澳洲幸运5开奖号码历史查询:unemployment insurance program is paid through the FUTA tax, which is charged to employers rather than employees. FUTA allows for the taxation of businesses by the government to fund state unemployment agencies. These funds are then dispersed among unemployed individuals who claim 澳洲幸运5开奖号码历史查询:unemployment compensation.

Like FICA taxes, most qualified cafeteria plan benefits are not subject to FUTA. However, adoption assistance benefits are subject to FUTA, in addition to FICA, but not income tax 澳洲幸运5开奖号码历史查询:withholding.