Internal Revenue Code 125 allows an employer to implement an employee benefit plan, which allows employees to select the benefit programs they prefer.
The plan offers two or more options and the employee chooses the option most appropriate for him or her from the “menu” of benefits available. It’s sort of like ordering lunch from the local deli – which is why the plan is referred to as a “cafeteria plan”!
Cafeteria plans, along with 401(k)s, are among the most popular employee benefit plans of the past decade. The tax benefits to the employer and employees far exceed the minimal required government reporting.
Cafeteria Plan Benefit Options
In general, the IRS allows the following benefits to be present in a Section 125 plan:
Group-term life insurance (up to $50,000; amounts above that level of death benefit may be subject to Social Security and Medicare taxation)
Accident and health plans
Long- and short-term disability benefits
Flexible spending accounts to save for health, medical, and childcare expenses
CODA [401(k) plans]
Dependent group life, accident, and health insurance coverages
Vacation
Employee Tax Aspects
The plan essentially allows expenses that normally would be paid by the employee on an after-tax basis to be paid via salary reductions on a pretax basis. This allocated income will not be subjected to FICA or income taxes. The result is that taxable dollars have been converted to nontaxable dollars – thereby increasing the employee’s take-home pay.
Employer Tax Aspects
Generally, employer contributions to a plan are income tax deductible. In addition, contributions on behalf of the employees, if such contributions are not included in the employee’s income, are not subject to FICA (Social Security) or FUTA (Federal Unemployment Tax Act). This can result in significant savings to the company’s bottom line.
The employer must file an annual information return (IRS Form 5500) stating plan participation, cost and business type.
Use-It-or-Lose-It
An important point for the employee to remember is that there can be no claim of any unused benefits or contributions from one plan year to the next. This is known as the “use it or lose it” rule.
Many employees steer clear of these plans because of this rule. You have to decide up front how much to put in the plan and if you don’t spend it all within a year, you forfeit the leftover amount.
Sounds risky – at least until you consider that the tax breaks are so powerful that even if you wind up forfeiting 20% of what you put into a plan, you’ll still come out ahead.
For example, let’s say you set aside $5,000 for
medical expenses in 2007 and wind up spending just $4,000. At face value, you’ve lost $1,000. But consider: If you’re in the 25% federal tax bracket and face a 5% state income tax as well as the 7.65% Social Security and Medicare tax, the $5,000 you put in the plan will save you more than $1,800 in taxes, leaving you $800 ahead. Put another way, you’d have to earn almost $6,300 to have $4,000 left over to pay those bills. Even if you forfeit $1,000, you still come out ahead. That’s why it’s wise to be aggressive in using flexible spending accounts.
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To fulfill this, we aim to adhere as strictly as possible to the World Wide Web Consortium’s (W3C) Web Content Accessibility Guidelines 2.1 (WCAG 2.1) at the AA level. These guidelines explain how to make web content accessible to people with a wide array of disabilities. Complying with those guidelines helps us ensure that the website is accessible to all people: blind people, people with motor impairments, visual impairment, cognitive disabilities, and more.
This website utilizes various technologies that are meant to make it as accessible as possible at all times. We utilize an accessibility interface that allows persons with specific disabilities to adjust the website’s UI (user interface) and design it to their personal needs.
Additionally, the website utilizes an AI-based application that runs in the background and optimizes its accessibility level constantly. This application remediates the website’s HTML, adapts Its functionality and behavior for screen-readers used by the blind users, and for keyboard functions used by individuals with motor impairments.
If you’ve found a malfunction or have ideas for improvement, we’ll be happy to hear from you. You can reach out to the website’s operators by using the following email
Our website implements the ARIA attributes (Accessible Rich Internet Applications) technique, alongside various different behavioral changes, to ensure blind users visiting with screen-readers are able to read, comprehend, and enjoy the website’s functions. As soon as a user with a screen-reader enters your site, they immediately receive a prompt to enter the Screen-Reader Profile so they can browse and operate your site effectively. Here’s how our website covers some of the most important screen-reader requirements, alongside console screenshots of code examples:
Screen-reader optimization: we run a background process that learns the website’s components from top to bottom, to ensure ongoing compliance even when updating the website. In this process, we provide screen-readers with meaningful data using the ARIA set of attributes. For example, we provide accurate form labels; descriptions for actionable icons (social media icons, search icons, cart icons, etc.); validation guidance for form inputs; element roles such as buttons, menus, modal dialogues (popups), and others. Additionally, the background process scans all of the website’s images and provides an accurate and meaningful image-object-recognition-based description as an ALT (alternate text) tag for images that are not described. It will also extract texts that are embedded within the image, using an OCR (optical character recognition) technology. To turn on screen-reader adjustments at any time, users need only to press the Alt+1 keyboard combination. Screen-reader users also get automatic announcements to turn the Screen-reader mode on as soon as they enter the website.
These adjustments are compatible with all popular screen readers, including JAWS and NVDA.
Keyboard navigation optimization: The background process also adjusts the website’s HTML, and adds various behaviors using JavaScript code to make the website operable by the keyboard. This includes the ability to navigate the website using the Tab and Shift+Tab keys, operate dropdowns with the arrow keys, close them with Esc, trigger buttons and links using the Enter key, navigate between radio and checkbox elements using the arrow keys, and fill them in with the Spacebar or Enter key.Additionally, keyboard users will find quick-navigation and content-skip menus, available at any time by clicking Alt+1, or as the first elements of the site while navigating with the keyboard. The background process also handles triggered popups by moving the keyboard focus towards them as soon as they appear, and not allow the focus drift outside of it.
Users can also use shortcuts such as “M” (menus), “H” (headings), “F” (forms), “B” (buttons), and “G” (graphics) to jump to specific elements.
We aim to support the widest array of browsers and assistive technologies as possible, so our users can choose the best fitting tools for them, with as few limitations as possible. Therefore, we have worked very hard to be able to support all major systems that comprise over 95% of the user market share including Google Chrome, Mozilla Firefox, Apple Safari, Opera and Microsoft Edge, JAWS and NVDA (screen readers), both for Windows and for MAC users.
Despite our very best efforts to allow anybody to adjust the website to their needs, there may still be pages or sections that are not fully accessible, are in the process of becoming accessible, or are lacking an adequate technological solution to make them accessible. Still, we are continually improving our accessibility, adding, updating and improving its options and features, and developing and adopting new technologies. All this is meant to reach the optimal level of accessibility, following technological advancements. For any assistance, please reach out to