How are future social security benefits affected by Cafeteria Plan elections?
A. It is difficult to determine with reasonable accuracy the effect of a Cafeteria Plan election today on the social security benefits received many years from now. It is true that because Cafeteria Plan elections avoid the FICA tax, future social security benefits will be reduced. Although the plan administrator is not required to inform participants that the future social security benefits may be reduced because of their election, we feel that this important information to give to the plan participants. Several employers offer optional insurance benefits to offset any potential social security benefit losses. Other employers suggest that their employees contribute any tax savings to their 401(k) profit sharing plans. Q.
