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Services & Products>> Group Benefit Products>> Section 125 Plans (Cafeteria Plans)
Section 125 Plans (Cafeteria Plan; (FSA)Flexible Spending Account; (POP) Premium Only Plan)
At Roger Hicks and Associates Group Insurance,Inc., we focus on assisting employers in every way to reduce administration and/or tax costs while still affording a generous benefit package to their employees. Section 125 Plans are one way of reducing the tax burden on both the employer and employee by allowing pre-tax deductions for premiums, unreimbursed health expenses, and dependent care expenses as explained below.
The Premium Only Plan (POP) affords employees the opportunity to use pre-tax dollars to pay for their portion of health care premium(s).
Employers may also offer flexible spending accounts to employees under a cafeteria plan that provides coverage under which specified, incurred expenses may be reimbursed. These include health flexible spending accounts for expenses not reimbursed under any other health plan and dependent care assistance programs.
Employer contributions to the cafeteria plan are usually made pursuant to salary reduction agreements between the employer and the employee in which the employee agrees to contribute a portion of his or her salary on a pre-tax basis to pay for the qualified benefits. Salary reduction contributions are not actually or constructively received by the participant. Therefore, those contributions are not considered wages for federal income tax purposes. In addition, those sums generally are not subject to FICA and FUTA.
There are three ways that an employee may use pre-tax dollars under a Section 125 Plan:
For more information on Section 125 Plans go to:
http://www.irs.gov/govt/fslg/article/0,,id=112720,00.html#4
For a listing of qualified medical reimbursement expenses go to: http://www.irs.gov/publications/p502/ar02.html#d0e226
Section 125 Plans are an excellent benefit that an employer may offer their employees for relatively low fees. Generally, the employer reduces enough through reduced FICA to offset plan fees and expenses.
Roger Hicks and Associates Group Insurance, Inc. works with several Section 125 third-party administrators to allow you to choose the administrator that works best for you. If you would like for us to contact you about establishing a Section 125 plan, contact us and we will be happy to help.
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