Plan Expenses

[Guest Neno]

Can the employer have participants pay for Administration Expenses of Cafeteria Plan. If so, what is the best way to handle. If not, is there something I can cite to tell him why?

Thanks for any help you can provide.

[Kirk Maldonado]

Yes. Many plans do that. They charge a flat fee each month for each participant. If the employer doesn't pick up the charge, it comes out of the employee's account.

This discourages people from making small contributions to the plan (e.g., $100 per year).

[E as in ERISA]

My understanding is that some may do it as a percentage of the contributions that would otherwise be made (e.g., 106% of amounts that the employee wants to contribute). Everyone still ends up with some tax benefit. But it can still reduce participation.