Cafeteria plans are great employee benefits. Established under the guidelines of Section 125 of the Internal Revenue Code, cafeteria plans allow employees to accept a salary reduction in exchange for paying health insurance premiums (and other items) with pre-tax dollars.
FSA’s (Flex Spending Accounts) and HRA’s (Health Reimbursement Arrangements) may also be impacted by Obamacare as well in ways never imagined.
There is no question that Obamacare rules will make health insurance more expensive for almost everyone, but little has been said about employers that drop their group insurance plans because of Obamacare.
If your employer drops your group insurance plan, or reduces your hours to the point that you LOSE YOUR HEALTH INSURANCE, you will also lose the tax breaks associated with a cafeteria plan, HRA, or FSA. If you buy health insurance through the exchange or in the open market from a licensed insurance broker, you will be paying those premiums with AFTER TAX DOLLARS.
Losing the tax benefits of your cafeteria plan is HUGE.
Not only will you pay MUCH HIGHER PREMIUMS under Obamacare, as much as 2x current rates, but you will do so AFTER paying your taxes.