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8 <br /> • <br /> scholarship and/or funding models that would allow businesses to contribute to existing subsidy <br /> programs for the benefit of their own employees or for the benefit of all,and building or <br /> contributing to the building of on-site centers designed to serve the needs of the business's <br /> employees. <br /> BENEFIT MODELS <br /> There are several benefit models that employers can utilize to pay or help employees pay for child <br /> care expenses. Some,like the"cafeteria plans"are utilized more often by smaller businesses or as a <br /> portion of the benefit package at a larger employer. Standard.benefit packages are more widely used <br /> and are found at most larger businesses. <br /> Internal Revenue Code Section 125 describes an arrangement by which an employer establishes a <br /> plan so employees may choose to reduce pay before taxes (pre-tax contributions),thereby avoiding <br /> tax on those dollars used to purchase benefits.The amount set aside is exempt from federal and state <br /> income taxes and FICA (Social Security) and Medicare taxes for the employee,and it is exempt from <br /> the Social Security and Medicare payroll tax match for the employer. <br /> Benefits that may be included in a Section 125 Plan include medical,dental,vision,group-term life, <br /> disability,and dependent care assistance.In Code Section 125,the IRS refers to these types of plans <br /> as "cafeteria plans."The term"cafeteria plan"is used by the IRS to describe any arrangement in <br /> which a participant has a choice between cash (taxable) and benefits (pre-tax). <br /> The most common types of Section 125 Plans are explained below: <br /> Insurance Premium Conversion:for payment by the employee of a portion of the cost for qualified <br /> insurance benefits,such as health,disability,or dental. <br /> Flex Plan or Flexible Benefit Plan:Premium Conversion with Reimbursement Accounts (Medical, <br /> Dependent Care,Adoption Assistance). <br /> Full-Flex Plan or Cafeteria Plan: a wide choice of benefits,usually with employer credits that the <br /> employee may allocate toward the cost of one or more benefits (including cash). <br /> In addition to these"cafeteria"style plans,employers may opt to provide child care costs as a direct <br /> benefit in a standard plan, similar to health,dental and life insurance plans offered by many large <br /> employers. In these cases, employees without children would get none of the benefit,much like an <br /> employee who does not use the employer health plan. <br /> SCHOLARSHIP AND OTHER FUNDING MODELS <br /> For businesses that are not able to adjust their benefit plans,scholarship and other funding models <br /> are another option for assisting employees with child care needs. <br /> Voucher Model..Employers contract with child care providers or child care centers in the community <br /> for services for their employees.Parents are given vouchers for all or part of their child care costs <br /> and the child care programs redeem the vouchers for payment through the employer. <br /> Reimbursement Model..Employees choose the child care arrangement best suited to their needs (child <br /> care center, family child care home,after-school program) and then receive a reimbursement from <br /> the company for some portion of the costs. <br /> 6 <br />