How It Works
How a Cafeteria Plan Works for You
By electing to redirect a portion of your salary to your company’s Cafeteria Plan, you essentially “bank” your money in a tax-free account. The money is used to pay for all those expenses and insurance premiums that formerly ate away at your take-home pay.
You still receive the same fringe benefits, but you are also saving tax dollars because you are paying for the benefits through the Cafeteria Plan.
You can realize significant savings by paying your current group insurance, out-of-pocket medical, and dependent day care expenses from a Cafeteria Plan. Depending on your marital status, deductions, and income, you could save between $25 to $45 on every $100 you spend on benefits. And remember, these are expenses you will be paying throughout the year. Why not pay them with tax-free dollars?