By allowing choice, cafeteria plans give employees flexibility to meet their individual needs and avoid duplicate coverage for families with two working parents. In addition, if an employee chooses child care in lieu of another available benefit, there is little or no direct cost to the employer. The employee pays no income tax or Social Security tax on his or her contribution. An FSA must meet special rules. If the account is funded by salary reduction, the employee must decide how much money to put into the account before the beginning of the year and may only change the amount mid-year in limited circumstances.
Money remaining in the account at year end is forfeited.
There are special rules for students and disabled parents. If the number is not included, the parent can neither receive tax-free benefits under an employer's plan nor claim the tax credit on his or her personal return. This Document is for informational purposes only. Please contact a professional concerning the applicability of the issues discussed in this document to your organization. As previously stated, the results of research on family-supportive benefits are consistently positive and suggest important benefits to employers who implement them.