This tutorial shows how to set up a Cafeteria Plan (Section 125 Plan) Deduction inside Payroll Mate® software.
A cafeteria plan is a separate written plan maintained by an employer for employees that meets the specific requirements of and regulations of section 125 of the Internal Revenue Code. It provides participants an opportunity to receive certain benefits on a pretax basis. Participants in a cafeteria plan must be permitted to choose among at least one taxable benefit (such as cash) and one qualified benefit.
https://www.irs.gov/government-entities/federal-state-local-governments/faqs-for-government-entities-regarding-cafeteria-plans
Summary of Steps
This is just a summary; please click “Download Tutorial” for detailed instructions with screenshots.
- Click → Company from shortcuts
- Click → Deduction Categories
- Click → Add
- Enter Title, Abbreviation, Select Calculation (Fixed is the general method) and Paid by
- Enter Default amount (can modify at employee level) and Cutoff as applicable (Note: There is generally a yearly maximum allowed for this type of deduction)
- Checkmark the W2 Options as applicable
- Click Exemptions and checkmark Federal Income Tax (Note: This tutorial assumes that the Cafeteria Plan payroll item is exempt from federal tax withholding)
- Click → OK
You will apply the Cafeteria Plan deduction to each employee as needed
- Click → Employees from shortcuts
- Select the employee to edit
- Click → Edit
- The Modify Employee Wizard will open, Click → Next until you reach the Deductions page
- Checkmark to select Cafeteria Plan and enter deduction amount
- Click → Next until you reach the end of the wizard
- Click → Finish
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