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PAYROLL CONCERNS
43. How does a cafeteria plan election affect an employer's minimum wage obligations?
The Department of Labor considers voluntary salary reductions for cafeteria plan benefits to be included as wages. Thus, a salary reduction plan should have no effect on an employer's minimum wage obligations. Employers subject to the Davis-Bacon Act (e.g., government construction contracts) should consult with their legal counsel to determine the effect of Section 125 on their wage and hour obligations.
44. Are salary reductions under a cafeteria plan includable for state income tax purposes?
Generally, no. However, Pennsylvania and New Jersey consider cafeteria plan contributions subject to state income tax withholding.
45. Are pre-tax salary reductions under a cafeteria plan subject to FICA?
No.
46. Are pre-tax salary reductions under a cafeteria plan includable for federal unemployment tax purposes?
No.
47. Are cafeteria plan benefits treated as wages for unemployment insurance purposes?
Many states treat cafeteria plan benefits as wages for state unemployment insurance purposes. You should check your specific state's unemployment insurance laws.
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