Snowe Introduces SIMPLE Cafeteria Plans

April 11, 2005

Senate Small Business Committee Chair Olympia J. Snowe (R-Maine) introduced legislation last week, S. 723, which would allow more small business owners to participate in Section 125 "Cafeteria Plans" with their employees.

Cafeteria Plans allow employees to pay for fringe benefits -- including health insurance, dependent-care reimbursement, and life and disability insurance -- with pre-tax wages.

The bill would create SIMPLE Cafeteria plans (similar to SIMPLE 401(k) plans) that ease business owners complicate with nondiscrimination rules and testing associated with tax advantaged Section 125 plans. The bill also would modify the "use it or loose it" rule associated with current Cafeteria plans by allowing up to $500 in unused funds to be rolled over annually into the employee’s Cafeteria plan or 401(k) plan.

In her floor statement upon introducing the legislation Snowe noted that, "Under the SIMPLE Cafeteria Plan, small companies will not have to struggle with satisfying the burdensome non-discrimination rules that often prevent them from offering valuable employee benefits to their workers. As a result, more small business employers will be able to provide their workers with the employee benefits that are often reserved for larger employers and that are otherwise unavailable because of the non-discrimination rules."

NSBA has been a consistent advocate for SIMPLE Cafeteria plans and applauds the senator for her work on advocating tax equity for small business owners.