As insurance rates continue to increase each year, it is apparent that municipalities need assistance with providing benefits while requiring employees to contribute toward the cost. This plan, also known as a Section 125 plan, allows employers who expect employees to contribute to the cost of their health insurance premiums to do so via a Premium Conversion Plan on a pre-tax basis. This simple payroll change allows the employee to avoid paying Federal, FICA and State tax on the contribution. The municipality saves by not having to pay the matching FICA tax on the contribution.
Another option available with a Cafeteria Plan is a Flexible Spending Account. There are two types of FSAs: health care and dependent daycare. The health care account allows employees to be reimbursed for professional medical expenses which are not reimbursed by insurance (deductibles, co-pays, eyeglasses, contact lenses, etc.). For dependent daycare, the IRS allows employees to pay up to $5,000 of their dependent daycare expenses on a pre-tax basis. The potential tax savings can be very substantial.
For more information on this win-win program, please contact VLCT Member Relations at 1-800-649-7915 or e-mail Susan Benoit, Inside Member Relations Representative.
Resources
Cafeteria Plan FAQs (on-site link)
Frequently asked questions about the VLCT Health Trust's cafeteria plan.
Request Information (on-line form)
Fill out this How Can We Help You Form for more information about our cafeteria plan options.
