Cafeteria Plans

The South Carolina Employment Security Commission established a policy whereby it would follow the guidelines of the Federal Unemployment Tax Act (FUTA) as to the treatment of payments made to cafeteria plans. In accordance with that policy qualified cafeteria plan payments, except for deferrals to a qualified cash or deferred payment arrangement (IRS Section 401(k) plans), would be excluded from wages in calculating state UI taxes.

It should be noted that Section 401(k) of the Internal Revenue Code is binding only for income tax purposes and amounts placed in this type of cash or deferred compensation arrangement would be considered wages, regardless of whether or not the arrangement is part of a cafeteria plan.

Any questions regarding the taxability of benefits included in a cafeteria plan should be directed to the Internal Revenue Service.