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. A Cafeteria 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.
Two popular options are Health Reimbursement Arrangements (HRAs) and Flexible Spending Accounts (FSAs). With an HRA, an employer can set aside money to help employees pay for specific out-of-pocket health care expenses. An FSA allows employees to be reimbursed for professional medical expenses which are not reimbursed by insurance (deductibles, co-pays, eyeglasses, contact lenses, etc.).
For more information on this win-win program, please contact VLCT Member Relations at 1-800-649-7915 or e-mail Larry Smith, Manager, Member Relations.
As of November 14, 2011, we are improving this page with information for 2012. The two PDFs under Resources are completely up to date and ready to use. Please visit again soon to find more helpful information and resources.