EBRI Issue Brief

Flexible Benefits Plans and Changing Demographics

Apr 1, 1991 25  pages


  • Among full-time employees in private firms employing 100 or more workers in 1989, 9 percent were eligible to participate in cafeteria plans, and 23 percent were eligible to participate in flexible spending accounts (FSAs). Generally, the percentage of employers sponsoring flexible spending plans increases with employers' size.
  • In 1989, 93 percent of employer-sponsored plans that offered employees some choice among benefits were at least partially funded by employees, although 84 percent of these plans also received an employer contribution.
  • Employees are not required to pay federal income or Social Security taxes on individual salary reduction contributions to qualified flexible benefits plans. Similarly, employers do not pay unemployment or Social Security taxes on these contributions.
  • Among employees eligible for FSAs in 1989, less than 20 percent contributed to a health care FSA, and only 3 percent contributed to a dependent care FSA.
  • Cafeteria plans differ from traditional benefits plans by providing an alternative delivery system that focuses on limiting employer expenditures and promoting individual choice while maximizing tax effectiveness.
  • Regulations released in 1989 require employers to make the maximum reimbursement under an employee's health care FSA available at all times throughout the plan year even if the employee has not contributed enough to cover the expenses at the time of the claim.