Cafeteria Plans Save Tax Money

Cafeteria Plans

A Cafeteria Plan allows employees to withhold a portion of their pre-tax salary to cover certain medical or child-care expenses. Because these benefits are free from federal and state income taxes, an employee's taxable income is reduced, which increases the percentage of their take-home pay. And because the pre-tax benefits aren't subject to federal social security withholding taxes, employers win by not having to pay FICA (workers' comp premiums) on those dollars.

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