Is your cafeteria plan in compliance? Common mistakes can be a recipe for disaster
Abstract: Cafeteria plans can be an attractive and cost-effective tool for offering benefits to employees, providing substantial tax savings for employer and employees alike. But all too often, businesses fail to fully appreciate the requirements that must be met to achieve these savings. One misstep could turn years of pretax salary reductions into taxable compensation, with potentially disastrous results. This article details how cafeteria plans work and lists pitfalls to avoid. A sidebar explains IRS guidance that eases cafeteria plan rules because of the COVID-19 pandemic.