Sometimes people call it a “ cafeteria plan ” because employees choose
exactly what they want, and everyone wants something different.
Accountants call them “ Section 125 Plans ” because that’s what the IRS calls
them. They’re pre-tax deductions, so the government is giving employees a
discount price for benefit deductions. And the benefits are often paid tax-free.
They help reduce staff turnover. When staff morale and staff loyalty improve,
employee turnover declines, and staff productivity rises. Every employer loves
to reduce payroll taxes and every employer wants greater workplace
Employers and employees want to reduce turnover, because employee
turnover is stressful. Employees love pretax deductions because they save
the income tax, the Social Security tax, and the Medicare tax. Cafeteria plans
are a no-cost benefit that can supplement a medical plan. That’s why some
people call it “ supplemental insurance ” or “ work group insurance ”. It can
help reduce the cost of deductibles and co-pays. People want to save medical
costs. Some employers cannot afford a health plan. They can still raise morale
and protect people with supplemental benefits. An employee program doesn’t
have to be so expensive that it’s unaffordable. And everyone wants to reduce
staff complaints. The cost of the insurance is a pay check deduction, which is a
convenience many people appreciate. The supplemental insurance plans are
similar to group insurance and often improve employee morale because they’
re benefits people cannot easily buy on their own.
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Look for HR Answers Now. You’ll see ways to cut employer taxes, cut payroll
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Whether you're a member of SHRM (Society of Human Resource
Management), a Mercer Consulting client, a WorldatWork Certified Benefits
Professional (CBP) or just a hardworking generalist, you know that better
benefits help recruitment and morale. HR Magazine, Human Resource
Executive, Employee Benefit News, and many similar publications constantly
focus on cost-effective ways to improve productivity by reducing staff turnover.
Some of the companies that sell Section 125 plans are Aflac, Colonial and Paul
Revere. Sometime the benefits include term life insurance, cancer insurance,
hospital stay insurance, dental insurance, disability insurance, critical illness
insurance, and accident insurance. Who doesn’t want to be offered employee
benefits? Who would turn down a dental plan? Why not offer employee
benefits on a voluntary basis? There’s no waste, because each person
chooses what he or she wants, and gets the equivalent of a discount by
purchasing the insurance on a pre-tax basis. That’s why it is done via payroll
deduction. Paycheck deductions mean easy payments instead of big lump
Employers buy group term life insurance but how can they know how much
each family really needs? It’s not like health insurance, which everyone can