Section 125 of the Internal Revenue Code authorizes the establishment of cafeteria plans. These plans allow an employee to "purchase" certain nontaxable benefits in lieu of receiving taxable cash compensation. Such plans can enable your employees to enhance their benefits with pre-tax contributions and also offer incentives to the employer through a reduction of FICA taxes. Through "premium-only" plans employee contributions toward the cost of medical, dental, vision, disability, AD & D, and a portion of group term life insurance coverage can be paid on a pre-tax basis.

A second phase of cafeteria plans called Flexible Spending Accounts enables employees to set aside money on a pre-tax basis to reimburse qualified medical and dependent day care costs. Broader cafeteria plans provide a range of choices in benefits versus cash compensation, including such items as a choice of medical, dental, vision and disability plans, vacation days and life insurance amounts.

A Defined Contribution Approach to Health Benefits

As benefit costs continue to increase, more employers are adopting a defined contribution approach to their health benefits through credit-based cafeteria plans. These credit-based programs allow an employer to establish their maximum expenditure for employee benefits. As benefit costs increase, these additional amounts are paid by employees, using pre-tax dollars. Nyhart’s consultants can assist you in developing a credit formula that meets your business goals.

Centralized Billing Service Benefits Smaller Companies

Many companies would like to offer benefit choices through a full cafeteria plan, but do not have the staffing needed to administer these plans. Nyhart is able to relieve this administrative burden through its centralized billing service. We are able to assist with initial enrollment, monitor enrollment in various benefit options and remit monthly premiums to your insurance carriers. The employer writes one check to Nyhart for distribution to your various insurance carriers.

Employee Focused Service

Nyhart, in collaboration with your staff, will establish the objectives for your cafeteria plan and determine the plan design that best meets those objectives. We can assist in preparation of the plan document and summary plan description for review by legal counsel. In addition, our Flex administration team will handle the recordkeeping of your program, including input of initial enrollment, generation of employee statements reflecting benefits elected and costs, processing all changes requested by the employee, and providing enrollment data to the appropriate service providers.

Our direct interaction with your employees permits processing of reimbursement requests and issuing reimbursement checks on a per-pay-period basis and checks may be mailed directly to participants’ home for added convenience. Lending full support to your Section 125 program, the breadth of our service makes these programs a win-win relationship for the employer as well as the employee.