Section 125 Cafeteria Plan
Included with your benefit package is a Flexible Spending Account, commonly referred to as a Cafeteria Plan. The Cafeteria Plan allows you to pay for certain health related and/or dependent care expenses with pre-tax dollars. Eligible expenses are health, dental, and vision premiums, un-reimbursed medical costs and child-care.
What are Eligible Expenses?
Health Related Premiums.
Your company will deduct your portion of health, dental and vision premiums from your gross salary before any taxes are figured. This makes your insurance coverage even more affordable.
Un-reimbursed Health Expenses
Expenses that are either not covered or only partially covered by insurance can now be paid pre-tax. These eligible expenses include deductibles, co-pays, dental expenses (even orthodontia), elective surgery, vision and more. For a complete list see the back of the Benefit Analysis form.
Dependent Care Expenses.
In many cases deducting your daycare pre-tax will be more of an advantage than the tax credit now offered by the IRS.
Other Health Premiums
The monthly insurance premium not paid by your company is eligible to be deducted pre-tax.
How does the plan work?
Your insurance premium will be paid directly to the insurance company. Un-reimbursed expenses, such as health and dependent care, will be divided into equal monthly deductions. This money is then put into an account. As you experience these costs, simply submit a request form and you will be reimbursed directly without paying tax on the money.
Use the Benefit Analysis Worksheet to assist you in estimating your expenses. These expenses are ones that you are sure to incur during the coming year. They must be out of pocket expenses. The IRS has several rules that govern this plan so be sure to attend the group meeting that will be held to explain the program.
Section 125 is an employee benefit designed to increase your disposable income. Your company has implemented this program to assist you in offsetting the increasing cost of health and childcare. That’s a benefit everyone can enjoy!
The Flexible Spending Account allows our employees to pay for health related and child-care expenses with tax-free income. The dollars you include in your Flexible Spending Account reduces your reportable and taxable income. Your annual contributions reduce what is reported on your W-2 tax form.
The following example shows the benefit of paying a health insurance premium with pre-tax dollars. In this case, the employee actually receives more take-home pay by paying the premium through their Flexible Spending Account.
| Without Plan | With Plan | |
| Gross Salary | $1,000 | $1,000 |
| Insurance (paid pre-tax) | $100.00 | |
| Taxable Salary | $1,000 | $900 |
| Income Tax (22%) | $220.00 | $198.00 |
| FICA (7.65%) | $76.50 | $68.85 |
| Total Taxes | $296.50 | $266.85 |
| Insurance (paid after-tax) | $100.00 | |
| Take Home Pay | $603.50 | $633.15 |
For full details, see the Summary Plan Description. The Summary Plan Description summarizes in plain language the operation of the Flexible Spending Account Plan.
If you choose to not participate in this program you will need to complete the Enrollment Form and check the box next to "NO".
If you do elect to participate in this program you will need to complete the Benefit Analysis Worksheet and Enrollment Forms.
Once you are signed up for the Plan you will need to complete a Request for Reimbursement Form to collect on the benefit.
Return ALL completed forms to Bev Fitts in A F Gray.
- Summary Plan Description
- Enrollment and Declination Form
- Benefit Analysis Worksheet
- Request for Reimbursement Form
- Change Request Form
- Change of Status Form
- EFT Direct Deposit Form
Please also visit the FAQ Page for answers to Frequently Asked Questions.