information for the community

CAFETERIA 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.. All health benefit plans offered in the District, dental plan, Vision, and the Cancer plans 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.


When you decide to pay premiums through the Cafeteria Plan, your selections are irrevocable for the benefit year 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
  • Open Enrollment
  • change or loss of employement by employee, spouse or dependent
  • ineligibility of a dependent child.

Unless you experience a qualifying family status change, you may not drop your coverage for that benefit year. Specific IRS requirements apply even within the listed categories. Employee Benefits 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 7.05% of your monthly or biweekly gross salary.

How Does the Plan Work?
A. Employee on a Monthly Payroll: This employee has a monthly gross income of $3,225.00, filed a W-4 as married with one (1) allowance, has a $377.00 deduction for health coverage, and a $73.00 deduction for dental coverage. By having the premiums on the Cafeteria Plan, this employee will increase his/her monthly take-home pay by $74.02. Savings will vary for each employee.

Calculation WITH Cafeteria Plan

Monthly Gross

$3,225.00

TRS Contribution

-206.40

Health, Dental

-450.00

Taxable Income

2,568.60

Federal Withholding Tax

-169.46

TRS Insurance (.65%)

-20.96

FICA (1.45%)

-40.24

Monthly Take Home Pay

$2,337.94

 

Calculation WITHOUT Cafeteria Plan

Monthly Gross

$3,225.00

TRS contribution

-206.40

Taxable Income

3,018.60

Federal Withholding Tax

-236.96

TRS Insurance (.65%)

-20.96

FICA (1.45%)

-46.76

Health, Dental

-450.00

Monthly Take Home Pay

$2,263.92



B. Emplopyee on a Bi-Weekly Payroll: This employee has a bi-weekly gross income of $1,100.00, filed a W-4 as married with one (1) allowance, has a $173.50 deduction for health coverage(one-half of monthly amount), and $36.50 deduction for dental coverage. By having the premiums on the Cafeteria Plan, this employee will increase his/her bi-weekly take-home pay by $24.04.

Calculation WITH Cafeteria Plan

Bi-Weekly Gross

$1,100.00

TRS Contribution

-70.40

Health, Dental

-210.00

Taxable Income

819.60

Federal Withholding Tax

-37.34

TRS Insurance (.65%)

-7.15

FICA (1.45%)

-12.91

Take Home Pay

$762.20

 

Calculation WITHOUT Cafeteria Plan

Bi-Weekly Gross

$1,100.00

TRS Contribution

-70.40

Taxable Income

1029.60

Federal Withholding Tax

-58.34

TRS Insurance (.65%)

-7.15

FICA (1.45%)

-15.95

Health, Dental

-210.00

Take Home Pay

$738.16