This information is provided as a service for clients of WC Administrators. Some of these answers may be plan specific and will not apply to plans not administered to plans not administered by WC Administrators, LLC.
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What is the purpose of a Cafeteria Plan?
The purpose of the Cafeteria Plan is to allow eligible employees to pay for Benefit Options with Pre-tax Contributions.
Who can participate in a Cafeteria Plan?
If your employer offers a cafeteria plan, each employee who satisfies their plan's Eligibility Requirements will be eligible to participate.
Eligibility requirements are set by the employer and may apply to the plan in general or to individual benefit options.
For information about eligibility requirements, please see your HR director or your plan administrator.
When does my participation in my company's Cafeteria plan end?
Your coverage under the Plan ends on the earliest of the following to occur:
If your employment with the Employer is terminated during the Plan Year or you otherwise cease to be eligible, your active participation in the Plan will automatically cease, and you will not be able to make any more Pre-tax Contributions under the Plan except as otherwise provided pursuant to Employer policy or individual arrangement (e.g., a severance arrangement where the former employee is permitted to continue paying for a Benefit Option out of severance pay on a pre-tax basis).
If you are re-hired within the same Plan Year and are eligible for the Plan (or you become eligible again), you may make new elections if you are re-hired or become eligible again more than 30 days after your employment terminated or you otherwise lost eligibility (subject to any limitations imposed by the Benefit Option(s)).
If you are re-hired or again become eligible within 30 days , your Plan elections that were in effect when you terminated employment or stopped being eligible will be reinstated and remain in effect for the remainder of the Plan Year (unless you are allowed to change your election in accordance with the terms of the Plan).
- The date that you make an election not to participate in accordance with this Cafeteria Plan Summary;
- The date that you no longer satisfy the Eligibility Requirements of this Plan or all of the Benefit Options;
- The date that you terminate employment with the Employer; or
- The date that the Plan is either terminated or amended to exclude you or the class of employees of which you are a member.
How do I become a participant?
If you are eligible to participate, you become a Participant by signing an Enrollment Form on which you agree to pay your share of the cost of the Benefit Options that you choose with Pre-tax Contributions.
You will be provided an Enrollment form on or before your Eligibility Date. You must complete the form and submit it to the Plan Administrator during one your plan's election periods.
You may also enroll during the year if you previously elected not to participate and you experience a qualifying event that allows you to become a participant during the year.
If that occurs, you must complete an election change form.
In some cases, the Employer may require you to pay your share of the Benefit Option coverage that you elect with Pre-tax Contributions. If that is the case, your election to participate in the Benefit Option(s) will constitute an election under this Plan.
What happens if I fail to return my Enrollment Form?
If you fail to return your Enrollment Form, it will be assumed that you elected not to participate in the plan. You will have to wait until the next enrollment period or until you experience a Qualifying Event before you can participate.
What are tax advantages and disadvantages of participating in the Cafeteria Plan?
You save federal income tax, FICA (Social Security)and state income taxes (for each where applicable) by participating in the Plan. Consider the following example to illustrate the potential tax savings under a cafeteria plan:
Plan participation will reduce the amount of your taxable compensation. However, there could be a decrease in your Social Security benefits and/or other benefits (e.g., pension, disability, and life insurance) that are based on taxable compensation.
Under what circumstances can I change my election during the Plan Year?
Generally, you cannot change your election under this Plan during the Plan Year. There are, however, a few exceptions.
First, your election will automatically terminate if you terminate employment or lose eligibility under this Plan or under all of the Benefit Options that you have chosen.
Second, you may voluntarily change your election during the Plan Year if you satisfy the following conditions (prescribed by federal law):
- You experience a "Qualifying Event" or "Change in Status Event" that affects your eligibility under this Plan and/or a Benefit Option; or
- You experience a significant cost or coverage change; and
- You complete and submit a written Election Change Form to the Plan Service Provider within 30 days of the event.
Third, an election under this Plan may be modified during the Plan Year if you are a Key Employee or Highly Compensated Individual (as defined by the Internal Revenue Code), if necessary to prevent the Plan from becoming discriminatory within the meaning of the applicable federal income tax law.
If coverage under a Benefit Option ends, the corresponding Pre-tax Contributions for that coverage will automatically end. No election is needed to stop the contributions.
What is a "Change in Status Event" or "Qualifying Event?
In general, a Change in Status Event or Qualifying Event refers to a life-changing event that may affect your eligibility or need to participate in your company's cafeteria plan.
These events may include, but are not limited to: births, deaths, adoptions, marriage, divorce, change in employment status of yourself or your spouse, judicial decrees, judgements or orders, changes in cost of a benefit, changes in coverage offered, loss of eligibiltiy of a dependent, etc.
To find out if you can change your election due to a Qualifying Event, please contact your plan administrator.
What happens to my participation under the Cafeteria Plan if I take a leave of absence?
The following is a general summary of the rules regarding participation in the Cafeteria Plan (and the Benefit Options) during a leave of absence.
For specific rules and policies, please consult your plan administrator.
Pleate note:You must make arrangements for FMLA leave with your plan administrators before you begin the leave. If arrangments are not made prior to the start of your leave, your participation in the plan will be terminated until arrangements have been made.
- If you go on a qualifying unpaid leave under the Family and Medical Leave Act of 1993 (FMLA), the Employer will continue to maintain your Benefit Options that provide health coverage on the same terms and conditions as though you were still active to the extent required by FMLA (e.g., the Employer will continue to pay its share of the contribution to the extent you opt to continue coverage).
- Your Employer may elect to continue all health coverage for Participants while they are on paid leave (provided Participants on non-FMLA paid leave are required to continue coverage). If so, you will pay your share of the contributions by the method normally used during any paid leave (for example, with Pre-tax Contributions if that is what was used before the FMLA leave began).
- In the event of unpaid FMLA leave (or paid leave where coverage is not required to be continued), if you opt to continue your group health coverage, you may pay your share of the contribution in one of the following ways:
The payment options provided by the Employer will be established in accordance with Code Section 125, FMLA, and the Employer's internal policies and procedures regarding leaves of absence and will be applied uniformly to all Participants. Alternatively, the Employer may require all Participants to continue coverage during the leave. If so, you may elect to discontinue your share of the required contributions until you return from leave. Upon return from leave, you will be required to repay the contribution not paid during the leave in a manner agreed upon with the Administrator. The Election Change Chart will let you know whether you are able to drop your coverage or whether you are required to continue coverage during the leave.
- With after-tax dollars while you are on leave,
- You may pre-pay all or a portion of your share of the contribution for the expected duration of the leave with Pre-tax Contributions from your pre-leave pay by making a special election to that effect before the date such pay would normally be made available to you. However, pre-payments of Pre-tax Contributions may not be utilized to fund coverage during the next Plan Year (except as otherwise permitted by law).
- By other arrangements agreed upon between you and the Plan Administrator (for example, the Plan Administrator may fund coverage during the leave and withhold amounts from your compensation upon your return from leave).
- If your coverage ceases while on FMLA leave (e.g., for non-payment of required contributions), you will be permitted to re-enter the Plan and the Benefit Option(s) upon return from such leave on the same basis as you were participating in the plans prior to the leave, or as otherwise required by the FMLA. Your coverage under the Benefit Options providing health coverage may be automatically reinstated provided that coverage for Employees on non-FMLA leave is automatically reinstated upon return from leave.
- The Employer may, on a uniform and consistent basis, continue your group health coverage for the duration of the leave following your failure to pay the required contribution. Upon return from leave, you will be required to repay the contribution in a manner agreed upon by you and the Employer.
- If you are commencing or returning from unpaid FMLA leave, your election under your Plan for Benefit Options providing non-health benefits shall be treated in the same manner that elections for non-health Benefit Options are treated with respect to Participants commencing and returning from unpaid non-FMLA leave.
- If you go on an unpaid non-FMLA leave of absence (e.g., personal leave, sick leave, etc.) that does not affect eligibility in this Plan or a Benefit Option offered under this Plan, then you will continue to participate and the contribution due will be paid by pre-payment before going on leave, by after-tax contributions while on leave, or with catch-up contributions after the leave ends, as may be determined by the Administrator. If you go on an unpaid leave that affects eligibility under this Plan or a Benefit Option, the standard election change will apply. The Plan Administrator will have discretion to determine whether taking an unpaid non-FMLA leave of absence affects eligibility.
How long will the Cafeteria Plan remain in effect?
Although the Employer expects to maintain the Cafeteria Plan indefinitely, it has the right to modify or terminate the Cafeteria Plan at any time and for any reason. Plan amendments and terminations will be conducted in accordance with the terms of the Plan Document.
What happens if my request for a benefit under this Cafeteria Plan (e.g., an election change) is denied?
You have the right to a full and fair review process. If you feel that a request was denied unfairly, you may contact the Plan Administrator to dispute the denial.
Who holds the funds I have set aside under the Plan?
The money you set aside for reimbursement of your medical expenses or work-related dependent care expenses will be held by he Company. Payroll deductions for insurance premiums will be forwarded to the respective insurance companies as the premiums become payable (usually monthly.)
Will my Accounts earn any interest?
No interest or other earnings will be credited to your Accounts at any time.
Can I withdraw cash from any of my Accounts?
No. Your Account balances can be used only for the purpose stated, such as providing premium payment or expense reimbursement benefits.
Can I shift amounts from one Account to another?
No. Credits cannot be transferred from one Account to another. For example, credits to your Unreimbursed Medical Expense Account can only be used for unreimbursed medical expenses.