Question

Employees currently pay their own medical and health insurance premiums The company does not offer group life insurance The company would like to offer dependent care assistance under Sec. 129 for its employees What advice would you give the company President about starting a fringe benefit program for the employees? What are some of the tax benefits to the company and the employees? Would a cafeteria plan be an option for this company?

Answer 1

Fringe benefits are additions to compensation that companies give their employees. Some fringe benefits are given universally to all employees of a company while others may be offered only to those at executive levels. Some benefits are awarded to compensate employees for costs related to their work while others are geared to general job satisfaction.

The majority of employers in the private and public sectors offer their employees a variety of benefits in addition to their salaries. These on-the-job perks, typically referred to as fringe benefits, are viewed as compensation by an employer but are generally not included in an employee’s taxable income.

A wide range of fringe benefits exist, and what is offered varies from one employer to another. The most common benefits include life, disability, and health insurance bundles; tuition reimbursement or education assistance; fitness center access or discounts; employee meals and cafeteria plans; dependent care assistance; and retirement plan contributions.