CAFETERIA
PLAN
Premium Only Plan
for
Flexible Spending plans, click here
What Is A Cafeteria Plan?
The Internal Revenue Service allows employees to pay some benefit premiums with
before tax dollars. It is entirely your choice which benefits you will include
on the Cafeteria Plan. In fact, that's where the name cafeteria comes from --
you pick and choose the benefit premiums you want to include. All health benefit
plans offered in the District, dental plan, the cancer/catastrophic illness
plan, and the group term life insurance are available for payment through the
Cafeteria Plan.
For many employees this becomes a wonderful benefit because it can allow your
gross salary to be reduced, which in turn lowers the amount of federal income
tax you pay each pay period! You see an immediate tax savings.
Is This Legal?
Absolutely! It is allowed under Section 125 of the tax code. Anyone
with doubts or questions can contact the local IRS Office directly for full
details.
Will I Have To Pay Taxes On These Benefits
Later?
No. The benefit costs are deducted from your salary before taxes, decreasing
the amount of salary subject to tax. At the end of the year, the salary
that is reported to the IRS and subject to tax is the lower, after benefits
amount.
What Does It Cost To Be On The Cafeteria
Plan?
It costs you nothing. This is a service provided by North East ISD.
How Much Will I Save Each Month By Being
On The Cafeteria Plan?
It is impossible to predict what everyone will save each month because savings
will vary according to which benefits are placed on the Cafeteria Plan and
individual salaries and rates of tax. Anyone needing help in calculating
their savings should contact their personal accountant.
This Seems Like A Great Benefit. Why Would
Anyone Choose Not To Participate?
When you decide to pay premiums through the Cafeteria Plan, your selections
are irrevocable for the benefit year (October 2008 through September 2009)
unless there is a change in family status as outlined in the Internal Revenue
Code, Section 125, and related regulations.
These changes include:
- a divorce, legal separation or marriage
- the death of a child or spouse
- the birth of a child
- the legal adoption of a child
- change in custody of a child
- FMLA leave of absence
- change or loss of employement by employee, spouse or dependent
- reduction in work hours, or
- ineligibility of a dependent child.
Unless you experience one of these changes in family status, or another change described in Section 4.7 of the District´s Cafeteria Plan, you may not drop your coverage for that benefit year. Specific IRS requirements apply even within the listed categories. Risk Management must be notified in writing within thirty one (31) days of any applicable status change in order to make election changes.
Is My Teacher Retirement System Deduction
Affected?
No. The TRS contribution will remain at the 6.90% of your monthly or biweekly
gross salary.
Remember:
Premiums paid through the Cafeteria Plan cannot be claimed as a deduction on
your income tax return at the end of the year. The premiums for term life insurance
cannot exceed a policy value of $50,000.
New Enrollment (new
employees only)
If you wish to enroll in the Cafeteria Plan for the first time, complete an
Election and Compensation Reduction Agreement
form. Check off those benefit premiums you want to include in the Cafeteria
Plan, indicate that you elect to participate in the plan, sign, date and return
the form to your campus/department representative or the Employee Benefits.
New employees have 31 calendar days from the date of employment to enroll in
the Cafeteria Plan.
Cancel Participation
If you wish to cancel all of your benefit premiums from the Cafeteria Plan,
you must complete an Election and Compensation
Reduction Agreement form indicating that you elect not to participate in
the NEISD Cafeteria Plan. This can only be done online during the Open
Enrollment period (July 30th --August 27th) unless you experience a family status
change listed above.
Change Election Choices (new
employees only)
If you are canceling some premiums but retaining others, you will need to complete
the Election and Compensation Reduction Agreement
form, indicate that you are electing to participate in the NEISD Cafeteria
Plan, mark those benefit premiums you wish to retain on the Cafeteria Plan.
Where Do I Get The Election Forms?
(new employees only)
Each campus and central office department has been provided (or simply click
on Election and Compenstation Reduction Agreement)
a supply of the Election and Compensation Reduction Agreement forms, or you
may contact the Employee Benefits Office.
How Does the Plan Work?
A. Employee on a Monthly Payroll: This employee has a monthly gross income of
$2,875.00, filed a W-4 as married with one (1) allowance, has a $18.00 deduction
for term life insurance, a $247.00 deduction for health coverage, and a $55.00
deduction for dental coverage. By placing the premiums on the Cafeteria Plan,
this employee will increase his/her monthly take-home pay by $52.64.
Calculation WITH Cafeteria Plan
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Calculation WITHOUT Cafeteria Plan
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B. Emplopyee on a Bi-Weekly Payroll: This employee has a bi-weekly gross income
of $650.00, filed a W-4 as married with one (1) allowance, has a $18.00 deduction
for term life insurance, a $123.50 deduction for health coverage(one-half of
monthly amount), and a $55.00 deduction for dental coverage. By placing the
premiums on the Cafeteria Plan, this employee will increase his/her bi-weekly
take-home pay by $20.83.
Calculation WITH Cafeteria Plan
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Calculation WITHOUT Cafeteria Plan
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Questions regarding NEISD Employee Benefits? Call 804-7231 or 804-7232