For employers it's important to note that to qualify as a flexible benefit plan, the employer must offer employees a choice between qualified (nont-taxable) benefits and cash. A plan that does not offer a cash option- for example, a plan that simply offers a choice of medical plans- is not considered a flexible benefit plan under this definition, whereas a plan that offers the option of paying for a (qualified, nontaxable) benefit with pretax wages (cash) is.
Flexible benefit plans have become increasingly popular with employers. Rising health and child care costs have risen beyond the ability of may businesses ability to pay. Employees still expect to receive a benefit package from employers and employers of all sizes have sought an affordable benefits plan. Flexible benefits plans offer the expected coverage but also utilize employee contributions to contribute to the cost of the benefits. Health and child-care costs have risen tremendously over the past several decades. Small businesses in particular are often unable to take advantage of the economies of scale that larger companies can use to their advantage in securing benefits programs. . One option is a flexible benefit plan. Indeed, many businesses have begun to offer flexible benefits in order to retain a competitive benefits package for employees.
There are several types of flexible benefit plans, including cafeteria plans and flexible spending accounts. Under a cafeteria plan employers may offer choices of several different benefit packages. A few of the eligible plans include health and group life insurance as well as medical reimbursement plans for non-insured expenses, elder care and child care, roa(k) plans, and dental and vision coverage.
Tuition assistance and other fringe benefits are exempt from the plans, even if they are not taxable. Funding for cafeteria plans may come from employer or be based solely on employee contributions or a combination of both. The employee may choose among a list of options such as health or life insurance.
Click here to learn more about flexible benefits packages.
