8900 / What is a simple cafeteria plan for small businesses?

For years beginning in 2011 and thereafter, the Patient Protection and Affordable Care Act (ACA) creates a safe harbor “simple cafeteria plan” under which an “eligible employer” (generally an employer with fewer than 100 employees) is treated as meeting any applicable nondiscrimination requirements ( Q 8899) for the year.²

The employer is required to make contributions on behalf of each “qualified employee” in an amount equal:

(1)  a uniform percentage (not less than two percent) of the employee’s compensation; or

(2)  an amount not less than the lesser of (x) six percent of the employee’s compensation for the plan year, or (y) twice the amount of salary deduction contributions of each qualified employee.³