Section 125 Cafeteria Plan

Also known as Flexible Benefit plan, Section 125 plans allow employees to pay for certain benefits with pretax dollars. This allows them to save taxes on insurance premiums, out of pocket health care and or related child or dependent care expenses. Any dollar the employee defers into the flex plan is withheld before any taxes are calculated. The employer will save their portion of social security tax, Medicare, payroll and any other state-required taxes.

The employee may elect to participate in any of three accounts. Federal, State and Social Security taxes are saved on every dollar contributed to the plan.

  • PREMIUM ACCOUNT allows employees to pay their group insurance premium contributions pretax, increasing their take home paycheck; HEALTH CARE
  • SPENDING ACCOUNT allows employees to use pre-tax monies to cover deductibles, co-pays and other non covered expenses;
  • DEPENDENT CARE SPENDING ACCOUNT allows employees to save taxes on child or dependent care expenses.

Cafeteria Plan FAQ

What is a Section 125 Plan?

Section 125 is a provision of the Internal Revenue Code that allows employees to pay their share of the cost of certain group insurance benefits, unreimbursed medical expenses, and dependent care expenses with pre-tax dollars. Under this provision, your paycheck is reduced by the amount you elect for the year. That money is removed from your salary structure before Federal Income, State Income, and Social Security taxes are calculated, and placed in a separate account. This results in lower taxable income, and higher take-home pay.

How does a Premium Payment Account work?

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What is a Medical Reimbursement Account?

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What is the Dependent Care Reimbursement Account?

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What is the Personal Policy Account?

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How do I enroll in the Section 125 Plan?

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What is the plan year?

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Are there any limits to the amount I can set aside for reimbursement?

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Can I make changes in my election or drop out before the end of the plan year?

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Can I switch dollars between accounts?

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How do I enroll and use the Medical Reimbursement Account?

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What if I don’t incur enough expenses within the year to get back the money deposited in my reimbursement account?

Lorem Ipsum is simply dummy text of the printing and typesetting industry. Lorem Ipsum has been the industry’s standard dummy text ever since the 1500s, when an unknown printer took a galley of type and scrambled it to make a type specimen book.

How does a Premium Payment Account work?

Lorem Ipsum is simply dummy text of the printing and typesetting industry. Lorem Ipsum has been the industry’s standard dummy text ever since the 1500s, when an unknown printer took a galley of type and scrambled it to make a type specimen book.

How do I enroll and use the Dependent Care Reimbursement Account?

Lorem Ipsum is simply dummy text of the printing and typesetting industry. Lorem Ipsum has been the industry’s standard dummy text ever since the 1500s, when an unknown printer took a galley of type and scrambled it to make a type specimen book.

What if I don’t incur enough expenses within the year to get back the money deposited in my reimbursement account?

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Who is considered an eligible dependent?

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How do I enroll and use the Dependent Care Reimbursement Account?

Lorem Ipsum is simply dummy text of the printing and typesetting industry. Lorem Ipsum has been the industry’s standard dummy text ever since the 1500s, when an unknown printer took a galley of type and scrambled it to make a type specimen book.

Who is considered an eligible dependent?

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Can I use the Dependent Care Account if I pay a family member for childcare?

Lorem Ipsum is simply dummy text of the printing and typesetting industry. Lorem Ipsum has been the industry’s standard dummy text ever since the 1500s, when an unknown printer took a galley of type and scrambled it to make a type specimen book.

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