Even with the depressed job market, savvy businesses understand that to attract and keep the best employees they must have a top-notch benefits package. Section 125 cafeteria plans have long been a favorite way to economically deliver popular benefits to the workforce. But what if you want to do even more? This article explores several ways to breathe new life into an existing benefit.

Employer Flex Credits
With one type of flex credit plan, employees elect salary redirection for the list of benefits offered through their employer's cafeteria plan as usual. But then, the employer gives them matching flex credits up to a specific dollar limit. The credits may only be used for benefits offered through the cafeteria plan and cannot be taken as cash.

For instance, assume a company elects to give matching flex credits of up to $400 per employee. For every dollar that an employee commits to the plan, the employer will subsidize, dollar for dollar, the employee's election amount up to $400.

An employer flex credit plan can lessen the effect of the "use it or lose it" villain… a common excuse for opting not to participate in a cafeteria plan. Flex credit plans also improve the employer's image — after all, who wouldn't appreciate a boss who "gives" away free money? Finally, it encourages more contributions to the plan, which can result in more FICA tax savings for the employer. The downside is the risk of money lost to terminated employees.

Vacation Days
Offering to let employees buy or sell vacation days doesn't cost anything and may be offered through a cafeteria plan. The money received by a participant when selling vacation days is added to compensation and taxed before ending up in the employee's net paycheck. Vacation days purchased reduce total taxable compensation.

Here's an example...Jane has worked for ABC Company for 6 years. With two small children at home, vacations are a luxury this family simply can’t afford. But a pay increase would be well worth giving up a week of paid time off.

For Jane, this benefit means more money in her pocket every week.

Joe, on the other hand, has always dreamed of vacationing in Europe. Three weeks of vacation, instead of two, would make the trip worthwhile. By purchasing his extra vacation time up front, Joe reduces his income a little bit each week.

As with the flex credit plan, this plan has its pros and cons. The advantages are that it can reduce accrued vacation/sick time that is building a liability on the employer's books; employees have more control over their compensation package; and employees must cash out unused vacation days purchased through the cafeteria plan at the end of the plan year.

The downside is that extra vacation time for some may mean extra work for others.

401(k) Plans
Flex credits intended for benefits may sometimes backfire. If an employer gives each employee $1,200 in flex credits each year, it's very possible that the more healthy employees will not use up their flex credits before the end of the year and end up forfeiting them back to the employer.

Try offering a 401(k) inside of the flex credit plan. Everyone now has a spot to use their flex credits while building a nest egg for retirement.

The advantage? It's a simple benefit change if a 401(k) plan has already been established and the flex credit plan may boost participation in the cafeteria plan.

The only real drawback is that 401(k) contributions are taxed differently than cafeteria plan contributions — FICA is withheld from 401(k) contributions.

Transit and Parking

Transportation benefits include the costs that employees incur for mass transit in their regular commutes to and from work. When these expenses are paid with pretax dollars, it means more savings for employers and employees. Employees may set aside up to $190 per month on a pre-tax basis for parking and an additional $100 per month for mass transit.

These are just a few ways that you can spice up your flexible benefits plan.