Other Employee Benefits

Question 1

Cafeteria Plans

Answer 1

Employee can choose benefits they want
Must include a cash option
401K can be part of a cafeteria plan

best when employee needs vary greatly (young and old) and employer can afford.

Disadvantage -complex and expensive to design
Complex tax requirements
HCE may lose tax benefit if discriminatory

Nontaxable benefits can’t be more than 25% of all non key employees

No Scholarships, Education Assistance, discounts, or retirement benefits other than 401K

Can exclude -
Not 21
<1yr service
covered under collective bargaining agreement
non resident alien

Question 2

Flexible Spending Account -FSA

Answer 2

usually used to pay for medical expenses not covered by insurance

Can also be used for dependent care

No self-employed persons or partners

Question 3

Health FSA

Answer 3

Salary reduction
Must make election before compensation is earned
Not subject to FICA or FUTA
Must make a claim for reimbursement 
$2550

Question 4

Dependent Care FSA

Answer 4

$5000
2 working spouses- both must earn more $5000 otherwise taxable
Must claim to return contributions
Not subject to FICA or FUTA
Children under 13

Question 5

Fringe Benefits

Answer 5

Tax Free

• Premiums paid by employer to health plan on you or spouses behalf
• Group term life up to 50K
• Daycare services provided by employer (limited)
• Co car
• Commuter vehicle and transit pass ($130/mo)
• Subsidized parking/parking spot ($255/mo)
• Occasional overtime meal, cab, theater, sporting tickets
• discounts on services up to 20%

Taxable

• Health ins premiums self employed, partners, 2% shareholders of S corp. (100% is deductible as adjustment to income 1040)
• Life insurance in excess of $50K if nondiscriminatory

Question 6

Voluntary Employee Beneficiary Association VEBA

Answer 6

Established by employers to fund benefits for members

• death benefits
• medical benefits
• disability
• legal expenses
• Unemployment
• Child care
• Severance
• Education
• NO DEFERRED COMP
• deductible to employer

Question 7

Pre-paid legal

Answer 7

employer funded
deductible by employer
taxable to employee

If individually purchased plans are paid for with after tax dollars but benefits are tax free

Question 8

Group LTC

Answer 8

Not a qualified benefit under cafeteria plan
If paid for with HSA is included in cafeteria plan
taxable to employee

Question 9

Dental

Answer 9

deductible by employer
tax free benefits

2 types
Managed care
Indemnity

Question 10

Vision

Answer 10

deductible by employer

taxable to employee