Employment Benefits Law and Legal Definition
Employment benefits are certain noncash and cash benefits received from an employer whose value are considered part of an employee's compensation. An employer generally must withhold income tax on these benefits from an employees regular pay for the period the benefits are paid or considered paid unless an exemption exists. Anytime an employer provides an employee a fringe benefit, that fringe benefit is subject to federal income taxes unless the law specifically excludes it.
For example, Work clothing that is provided by the employer is not taxable if the employee must wear it as a condition of employment and the clothes are not suitable for everyday wear. It is not enough that the employee wears distinctive clothing, nor is it just enough that the employee does not wear the clothes outside of work. The employer must specifically require the clothing, and the clothing must not be suitable to take the place of regular clothing. For example, the cost and upkeep of work clothes for firefighter, police officers and health care workers would not be taxable. A police detective’s suit jacket is suitable for everyday wear, and therefore, is taxable.
A cafeteria plan is a plan that offers flexible benefits under the Internal Revenue Code Section 125. Employees choose their benefits from a "menu" of cash and benefits, some of which can be paid with pretax deductions from wages. The plan can provide a number of selections, including medical, accident, disability, vision, dental and group term life insurance. It can reimburse actual medical expenses or pay children’s day care expenses.
Once employees elect to shift a portion of their salaries into the plan, the election is not revocable except under specific circumstances, such as changes in marital status, number of dependents or spouse’s employment. Also, any funds unused by the end of the plan year are also not refundable and will be forfeited by the participant.
Legal Definition list
Related Legal Terms
- Absence Rate [Employment Law]
- Accelerated Benefits (Health Care)
- Accelerated Life Insurance Benefits
- Acceptance-of-the-Benefits Rule
- Across-the-Board Increase [Employment]
- Adverse Employment Action
- Adverse Employment Decision
- Age Discrimination in Employment Act
- Area of Employment
- Arising Out of and in the Course of Employment