From which taxes are cafeteria plan contributions generally exempt?

Cafeteria plan contributions are generally exempt from Social Security (SS), Medicare (Medi), Federal Income Tax (FIT), and Federal Unemployment Tax Act (FUTA). This is primarily because contributions made to a cafeteria plan, which includes flexible benefits that employees can choose from, are considered pre-tax deductions.

By allowing employees to use pre-tax dollars to pay for certain benefits (like health insurance or retirement savings), these contributions reduce the employee’s taxable income. This tax treatment applies to the benefits availed under the cafeteria plan, effectively shielding those amounts from SS and Medi taxes, along with federal income tax. Similarly, FUTA, which is linked to unemployment taxes for employees, also benefits from this pre-tax classification.

Some options may include taxes that are not applicable under these specific provisions. For example, state income taxes (SIT) or state unemployment taxes (SUI) may have different regulations and may not be universally exempt across all states. Thus, focusing on SS, Medi, FIT, and FUTA accurately reflects the common exemptions granted to cafeteria plan contributions.