In the Winter 2007 Quarterly Newsletter from the Womens Institute for a Secure Retirement, cafeteria plans or flexible spending accounts are described as follows: These plans allow employees to contribute a portion of salary, before taxes, to accounts designated for health-care expenses, including premiums and child care expenses
If you dont have one at your job, ask your employer about setting one up. You can reduce your federal taxes and have more money left to fund your retirement account. Actually cafeteria plans are far better for employees than this description because each employee is generally allowed to select from a variety of benefits the ones that the employee wants or needs most (hence the derivation of the name cafeteria plan).
Unfortunately due to the tax code, small-business owners, whether they operate as sole proprietors, partners, LLC members, or 2% or more Sub-S owners, are all prohibited from participating in a cafeteria plan. Further, the tax code sets forth discrimination tests that make it all but impossible for the remaining small-business owners (only those owning stock in a C corporation or owning less than 2% in a Sub-S corporation) to have any meaningful benefit from the plan. Not surprisingly, this creates quite a disincentive for small-business owners to provide these plans for their employees. Even though cafeteria plans can provide health insurance, dental insurance, life insurance and disability insurance, they are prohibited from offering long term care insurance as one of the benefits that can be provided to employees. Given the longevity of our aging population, we should be providing people with the opportunity to buy this insurance in an easy, tax free, payroll deduction way exactly what a cafeteria plan provides employees.
Sens. Olympia Snowe, Jeff Bingaman and Kit Bond have come up with a SIMPLE cafeteria plan bill that would allow small-business owners to participate in a cafeteria plan, provide a small-business exemption from discrimination tests in exchange for the company making a contribution on behalf of its employees and, among other needed reforms, allows long term care insurance to be offered as an optional benefit under the plan. The input of all major small,business associations and cafeteria plan providers was solicited on this important legislation and it has the support of all of these groups.
As president would you support the initiative to promote small business cafeteria plans so that employees and owners of small businesses can enjoy this same benefit offered by larger businesses and governmental entities?