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Flexible
Benefit (Pre-tax) Plans
Premium
Coverage Plans, Flexible Spending Account Plans and Cafeteria Plans
are pre-tax plans defined via sections 125, 105h and 129 of the
IRS Code. Each pre-tax program can be adopted separately or in any
combination by the employer.
Premium
Conversion Plans allow employees to pay for their share of group
health, life, dental, and disability premiums with pre-tax dollars.
The employee will reduce their taxable income and pay less in income
tax and Social Security Tax. The goal here is more take-home pay.
Flexible
Spending Accounts
accumulate predetermined pre-tax contributions, which are used to
reimburse eligible medical and/or dependent care expenses. Flexible
Spending Accounts may be funded by employee salary reduction, by
the employer, or by a combination of the two. The money the employee
deposits in the account is deducted from his/her gross pay before
federal income, state income and FICA taxes are calculated. These
deposits are not considered current taxable income and, therefore,
do not appear on the employee's W-2 form as taxable income. After
the employee pays a reimbursable expense, a claim form is submitted
to the Plan Administrator with an itemized bill or receipt. Eligible
expenses will be reimbursed in tax-free dollars.
Cafeteria
Plans
are plans that provide employees with benefit "dollars"
and a menu from which they can choose benefits to purchase in accordance
with their individual needs. Cafeteria Plans are the most complex
benefit structure to implement; however, they can effectively reduce
employee benefit costs.
If
you would like to learn more about Flexible Benefit Plans, please
click here.
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