Take another look at the cafeteria plans


Cafeteria plans are getting new attention during the pandemic to give employees the ability to select – and fund with pre-tax money – optional insurance benefits and expense accounts – that suit their health and care needs.

Canteen plans are also known as Section 125 plans (according to the appropriate section of the Tax Code) and are used to route employee contributions to corporate health insurance funds and 401 (k) retirement plans. However, they received renewed attention during the COVID-19 pandemic to allow employees to use pre-tax dollars to fund additional health care such as health care. B. Serious Illness Insurance. They also channel deferred health savings accounts (HSA), Health Flexible Spending Accounts (FSA), and dependent care FSAs (DC-FSAs), sometimes referred to as dependent care assistance programs, as well as life and disability insurance and even debit cards for the Local transport.

“Cafeteria plans are a necessity when your employees make salary cuts to include a portion of their pre-tax salary in the [health or other insurance] Rewards “and tax-deferred spending accounts, said Heather DeBlanc, partner in the employer’s Los Angeles office of Liebert Cassidy Whitmore,” she said.

[SHRM members-only toolkit:

Understanding Section 125 Cafeteria Plans]

Tax-privileged FSAs are still popular

Bill Sweetnam, legislative and technical director of the Employers’ Council on Flexible Compensation in Washington, DC, said FSAs continue to be a popular option offered to employers through canteen plans. “The pandemic has not adversely affected their popularity,” he noted. Instead, “because of the pandemic, the perception of employers’ health care as a good service by employees has been strengthened”.

The traditional use-it-or-lose-it rules for FSAs, which were relaxed during the height of the COVID-19 pandemic, will come back into effect for the planning year 2022. However, unlike HSAs, which must be tied to a high deductible health insurance plan, health FSAs are available to employees regardless of their health insurance.

“Our members have interviewed employees who participate in FSAs and they find that employees are concerned about the possible loss of amounts that have contributed to an FSA,” said Sweetnam. “Employees appreciate their FSA advantage even more if they know that the probability of losing money is lower due to the carry-over rule.” At most in the next planning year.

Sweetnam encouraged employers who are not currently offering an FSA to consider it.

“Most employer health plans have deductibles and co-payments, and an FSA will provide a tax-efficient way for their employees to pay for health bills that are not covered by their employer’s health insurance,” he noted.

The big picture

Employers shouldn’t just assume that their employees understand the potential benefits or how their canteen plans work, say benefits counselors. The mere offering of benefits through a canteen plan is never enough to ensure appropriate use. Communication and education are a must when enrolling or onboarding new employees.

“I am a firm believer in total compensation,” said Jennifer Barton, who heads employee benefits at World Insurance Associates. Barton recommends employers conduct an assessment of the total pay gap. “I think this is now more important than ever for an organization to evaluate this,” she said. Employee performance needs have shifted and changed during the pandemic – employee priorities are likely to remain different from what they have been in the past, especially for those who continue to work remotely, she said.

For example, while commuter benefits may have been popular before the pandemic, in some cases they are likely less popular now, Barton said. Meanwhile, the diverse needs of home-based workers, including caring for children and others, are likely to spark interest in care services such as DC-FSA.

“I think the most important thing an HR professional can do today is to take stock of what they have for their employees and then go out and talk to the employees about the benefits they appreciate, they not worth much to see and those they don’t have access to but would like to get, said Barton.

Whether or not employee input is gathered through surveys, focus groups, or otherwise, it is important to “understand what is critical today in light of the changing dynamics faced by employees at home and at work.”

[Related SHRM article:
Soliciting Employee Feedback for 2022 Benefits Changes]

SHRM research shows …

HSAs were the fastest growing type of health account, but medical FSAs remained the most popular over the past year, being offered by 68 percent of respondents, while HSAs were offered by 59 percent, according to the Society for Human Resource Management’s 2020 Employee Benefits survey. From September 28 to November 10, 2020, responses were collected from 2,504 HR experts.

Organizations also expanded supplemental health benefits in almost all categories last year as the pandemic resulted in higher than usual sickness rates and hospital stays. (In the case of long-term care insurance, in contrast to the contributions to supplementary health insurance, contributions to long-term care insurance cannot usually be paid before taxes.)

Lin Grensing-Pophal, SHRM-SCP, is a Wisconsin-based business journalist with experience in recruiting.

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