To accommodate today's many variations in family relationships, life-styles and values, flexible compensation or cafeteria benefit plans have emerged. In addition to helping meet employee needs, cafeteria plans also help employers control overall benefit costs.
Cafeteria plans offer employees a minimum level or core of basic benefits. Employees are then able to choose from several levels of supplemental coverage or different benefit packages. All packages are of relatively equal value, but can be selected to help employees achieve personal goals or meet differing needs, such as health coverage (family, dental, vision), tax reduction (thrift plans, salary reduction), retirement income (pension plans) or specialized services (day care, financial planning, legal services).
Careful planning and communication are the keys to the success of flexible compensation. Employees must fully understand their options to make choices of greatest benefit to them and their families. Both employers and employees must fully understand the tax consequences of the various options.