Personal Finance--Cafeteria Plans 2
Terms
undefined, object
copy deck
- Dissatisfier
- if an employer offers a comprehensive health care plan and then either increases the employee's share of the premium and/or reduces the benefits in the plan, employees become dissatisfied.
- Doctrine of Constructive Receipt
- a person is deemed to have received funds when the person has control over the disposition of money; when the present value of money is specifically set aside for use by the person; or when the funds are available to the person. There are exceptions: such that the value of all the benefits will not be considered income to the covered employees.
- Compensation plus the value of the benefits offered
- Under the Safe Harbor Test, discrimination is measured based on the amount of what?
- Cafeteria Plan Rules
- plan must offer a cash benefit that would be generally be taxable to the employee as compensation. There must be one or two qualified benefits that would not be taxable to the employee if paid by the employer. Plan must be offered to employees in such a manner that it does not discriminate in favor of highly compensated employees. All employees must be covered by the plan no later than the beginning of the plan year following his or her completion of three years of employment.
- $5,250
- Education Assistance program payments are considered a benefit that cannot be offered tax-free, but this is not true. They are tax free until they are greater than what amount?
- IRC Section 414(q)
- defines a highly compensated individual.
- Definition of a Highly Compensated Individual
- an employee who received total compensation (earned income) greater than $100,000 (2007) in the preceding year, AND if the employer choose, was in the top 20% of all employees when ranked on the basis of total compensation paid in the preceding year OR an individual who owned more than 5% of the capital or profits in the business at any time during the year or the preceding year OR a spouse or dependent of any of the above three classes.
- Seperately
- How are the benefits included in a cafeteria plan tested for discrimination (in what manner)?
- $50,000
- What is the maximum amount of group term life insurance that an employer can provide to an employee and not cause an adverse tax implication to that employee?
- Safe Harbor Test
- requires employees covered under the plan to be classified in a manner that precludes discrimination from highly compensated employees. Discrimination is based on the amount of compensation plus the value of the benefits offered. Each benefit in their cafeteria plan is separately tested for discrimination.
- Satisfier
- it makes employees happy and they generally feel that a particular benefit or group of benefits is an indication that their employer appreciates them.
- precludes discrimination from highly compensated employees
- Under the Safe Harbor Test, employees covered under the benefit plan are required to be classified in a manner that what?