Successful businesses provide a work environment and compensation package that is attractive to both current and prospective employees. For employees, the most attractive environments and compensation packages are the ones that offer them choices.

The number of companies offering their employees flexible work arrangements such as flextime and telecommuting continues to grow. However, business owners often overlook the significance of providing employees with choices and options regarding their benefit packages. To meet employees' needs for more choices and control in their benefits packages, many employers are now offering cafeteria plans.

A cafeteria plan is a benefit plan that allows an employee to customize a benefit package for his or her individual needs by selecting from a "menu" of benefits. The benefits that are offered to employees are selected by the employer and are funded with nontaxable employer dollars. Cafeteria plans are referred to by many names, including flexible spending accounts (FSA), choice spending accounts, section 125 plans, and/or reimbursement accounts.

In addition to empowering employees by allowing them to make decisions regarding their benefits, a cafeteria plan provides significant tax savings to both employer and employees. Employees are able to increase their discretionary income through decreased social security (FICA), federal, and state income taxes. The employer's bottom line is enhanced through decreases in social security (FICA) and unemployment taxes. A cafeteria plan is truly a win-win situation for both the employer and employee.

At Watkins Uiberall, we help our clients save tax dollars and become employers of choice by assisting them in establishing cafeteria plans and managing the compliance issues that surround them. Watkins Uiberall offers clients a full range of cafeteria plan administration services, such as: