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Questions about Cafeteria Plan Regulations

Cafeteria plans are a kind of employee benefit plan that help employees to choose between different kinds of benefits, including group-term life insurance, dependent care assistance, and more. If you have questions regarding how your cafeteria plan works, get in touch with Employment Lawyers on JustAnswer for quick and helpful legal information. Listed below are a few questions answered by the Lawyers regarding cafeteria plans.

As an employer, what benefits can we offer employees on a 125 Cafeteria Plan?

The items listed below are what can be included in a 125 cafeteria plan, according to the IRS rules:
- Accident and health benefits (but not Archer Medical Savings Accounts or long-term care insurance)
- Adoption assistance
- Dependent care assistance
- Group-term life insurance coverage (including costs that cannot be excluded from wages)
- Health Savings Accounts (HSAs). Distributions from an HSA may be used to pay eligible long-term care insurance premiums or qualified long-term care services.

The cafeteria plan cannot include the following items:
• Archer MSAs (Archer Medical Savings Accounts)
• Athletic facilities
• De minimis (minimal) benefits
• Educational assistance
• Employee discounts
• Lodging on your business premises
• Meals
• Moving expense reimbursements
• No-additional-cost services
• Transportation (commuting) benefits
• Tuition reduction
• Working condition benefits
• Scholarships or fellowships

With regard to health benefits, can two employees—one who works 40 hours a week and one who works 32 hours—be charged a different contribution amount by the same employer?

In most cases, an employer would charge employees the same amount for the same benefits if the company doesn’t follow a cafeteria plan or other kind of percentage contribution plan. In any case, there is no prohibition by law against employers charging varying amounts, as long as the employer does not discriminate against employees with regard to gender, race, age, disability, national origin, or religion.

I have a policy with Americo Financial and wish to roll an annuity over into an IRA. I have requested for a policy surrender form twice. Earlier on, my employer offered employees a cafeteria plan in which Americo misrepresented the annuity. A court case was fought, and many of my colleagues got their money back. Now my employer does not offer annuity plans under the cafeteria plan anymore. Can you tell me how I can roll over my annuity into an IRA?

You can only take out your annuity (if it was contributed by your employer through a salary reduction agreement) when you terminate your employment, or if the employer transfers to another company and cancels its agreement with Americo. To move the money into an IRA, a changing event has to take place. While you are still in employment, the money that you contribute towards the plan isn’t yours, technically speaking. To roll over the money, you need to meet a qualifying event, such as termination of your employment, termination of the plan, divorce, or death.

If a qualified employee decides to participate in an IRS 125 plan, does the IRS set a limit as to how much the employee is allowed to set aside for health care reimbursement from their salary? Also, what is the maximum amount that an employee can set aside for health care needs under the 125 plan?

Under a Dependent Care Assistance program, an employee can exclude up to $5,000 worth of benefits from his gross income each year. The limit is lowered in the case of a married couple who are filing separate tax returns. Any more spent is reported on a W-2 form. However, there is no limit on tax-free contributions if the employee has a flex spending cafeteria plan.

Cafeteria plans provide many benefits to employees. But it is important for both employers and employees to know how they work in order to make the most of what they offer. Employment Lawyers on JustAnswer can clarify questions you may have on cafeteria plans. Get your questions answered by them now both quickly and affordably.
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