A salary reduction agreement is a written agreement between an employee and his employer, in which the employee chooses a taxable amount that is voluntarily withheld from his salary. These frequently asked questions and answers are provided only on general information and should not be invoked as any legal power. They are designed to provide the user with the information they need to respond to general requests. Because of the uniqueness and complexity of federal tax legislation, it is essential to ensure a complete understanding of the specific issue presented and to carry out the necessary studies to ensure that a correct answer is given. In general, no. If you only have a cafeteria plan, you don`t need to submit a 5500 or schedule F form. However, if you have a social assistance plan, you may need to file a refund for that plan, in accordance with Ministry of Labour regulations. Please read the 5500 instruction form or contact the U.S. Laboratory Department for more information. You also have support from our Customer Account Services Office.

As a general rule, a worker can exclude up to $5,000 from benefits received under a program to help dependents per year. The limit will be reduced to $2,500 for married employees who submit separate returns. The exclusion cannot be greater than the working income of the worker`s employee or spouse. All dependent benefits that the employer paid to the employee or that were paid on behalf of the worker (including amounts from a plan covered in Section 125) must be listed in box 10 of Form W-2. Any amount over $5,000 should be included in Fields 1, 3 and 5 in the form of “wages,” “social security wages” and “Medicare salaries.” For more information, please see 535 PDF and 15-A PDF. A section 125 plan is the only way an employer can offer workers a choice between taxable and non-taxable benefits, without the choice leading to making benefits taxable. A plan that offers only one choice between taxable benefits is not a section 125 plan. Salary reduction agreements are the basis of Section 125 “Cafeteria Plans,” which give the worker a choice between taxable income and a tax-free benefit. Employer contributions to the cafeteria plan are generally paid under wage reduction agreements between the employer and the worker, in which the employee agrees to pay a portion of his pre-tax salary to the payment of qualified benefits. Contributions to the wage reduction are not actually or constructively.

Therefore, these contributions are not considered salaries for federal income tax. In addition, these amounts are generally not subject to FICA and FUTA. See sections 3121(a) (5) (G) and 3306 (b) (5) (G) of the internal income code. A cafeteria plan is a separate written plan, managed by an employer for employees, that meets the specific requirements and requirements of section 125 of the internal tax code. It offers participants the opportunity to obtain certain pre-tax benefits. Participants in a cafeteria plan must be allowed to choose between at least one taxable benefit (for example. B cash) and a qualified benefit.