Tax Savings on Voluntary Benefit Plans Eludes Most Workers
SOURCE: U.S. Bureau of Labor Statistics
The percentage of working Americans able to take advantage of tax savings on flexible benefits available through Cafeteria Plans is surprisingly low according to the Bureau of Labor Statistics.
A flexible benefits cafeteria plan is an employer sponsored benefit program that allows employees to choose a personalized mix of taxable and nontaxable benefits for themselves and their dependents.
Flexible benefits include voluntary benefit plans including dental, vision, indemnity plans, etc.
The following is from the Bureau of Labor Statistics report:
The BLS publishes the percentage of workers with access(2) to cafeteria benefits by various worker(3) and establishment(4) characteristics. Chart 1 provides a summary of the percentage of workers with access to individual cafeteria benefits by occupational group and the sections explain the features of each benefit.
Flexible benefits
In March 2025, 14 percent of civilian workers(5) had access to flexible benefits, whereas 11 percent of private industry workers had access and 36 percent of state and local government had access to this benefit. Within the education and health care industry, 35 percent of workers in junior colleges, colleges, and universities had access to flexible benefits, 38 percent of elementary and secondary school workers, and 33 percent of hospital industry workers had access. (See chart 2.)
In a flexible benefits plan, employers provide workers with “benefits credits.” These credits may equal a fixed dollar amount for each worker, or an amount that varies according to the employee’s earnings, length of service, size of family, or other characteristics. The employee then chooses from various benefits and benefit levels, using credits to purchase the desired benefits. If the credits do not pay for the benefit, employees may be able to fund the difference with pre-tax dollars.
Several options are usually available in flexible benefits plans, including various levels of coverage for life insurance, dental care, medical care, or long-term disability insurance. Employees covered by flexible benefits plans may receive cash in place of benefits or deposit unused credits into reimbursement accounts (such as dependent care or flexible spending account). They also may purchase short-term disability coverage, deposit credits into a retirement plan, or buy and sell vacation days. Participants are often required to purchase minimum levels of coverage, such as a basic level of life insurance.
