Thursday, March 30, 2017

Cafeteria Plan General FAQs

What is a Cafeteria Plan?

Exactly What Benefits can be offered as part of a Cafeteria Plan?

What type of plans are available?

What is a FSA?

What is a Flex Convenience Card?

How do I acquire a Section 125 claim form? 

What is a Cafeteria Plan?

A cafeteria plan is fringe benefit plan specifically authorized by Section 125 of the Internal Revenue Code. It is a way of providing employees with valuable benefits—where both the employer and employees save significant amount on taxes. Generally, employees are given a choice to "redirect" part of their salary. Each employee then uses the "redirected" part of his salary to purchase benefits from a "menu" of non-taxable benefits offered by the plan (hence the term "cafeteria plan). Back to Top

Exactly What Benefits can be offered as part of a Cafeteria Plan?

The allowable non-taxable benefits include both premium only and flexible spending account benefits.

PREMIUM ONLY BENEFITS FLEXIBLE SPENDING BENEFITS
  • Health Insurance
  • Accident Insurance
  • Group Term Life Insurance
  • Disability Insurance
  • Vision Care Insurance
  • Cancer Insurance
  • Intensive Care Insurance
  • Hospital/Surgical Insurance
  • Dependant Care
  • Medical Reimbursement
  • Transit Reimbursement

A plan can offer some or all of the allowable benefits. You, the Employer, choose which benefits you want to make available to your employees. Your employees, in turn, select the benefits that most suit their needs. Back to Top

What type of plans are available?

The simplest plan is a PREMIUM ONLY PLAN (POP).

In a POP the only benefits offered by an employer are insurance products such as employee health/HMO, dental, term life, cancer, accident/intensive care, hospital/surgical or disability. The employer selects the benefits that will be offered to his employees on the “menu of benefits”. Each employee then chooses which benefit(s) best suit his needs and pays for the benefits he has selected with pre-tax deductions from his paycheck. The insurance carriers simply bill the employer for the premiums due, which are deducted from the employee’s paycheck before taxes. There are no claims to file and this type of plan is easily understood by the employees.

The FULL Plan with flexible spending accounts will increase the benefits offered to the premium only plan by adding (1) un-reimbursed medical expenses and (2) dependent care expenses. Each employee estimates expenditure for his entire family for the cafeteria plan operation year. Then this amount will be deducted, in equal amounts over the plan year from his paycheck before taxes are withheld by the employer. Back to Top

What is a FSA?

Let’s start with the definition of FSA. Quite simply, it stands for Flexible Spending Account, and can be an indispensable part of your overall benefits program.

Here’s how it works. An FSA is an account your employer sets up so you can pay for a variety of healthcare needs like insurance co-pays, deductibles, even some dental and vision-care costs. But here’s the best part. Your FSA is funded entirely by your pre-tax income.  Back to Top

What is a Benefits Card?

Depending on your employer’s plan, the Benefit Card allows you to directly pay for your eligible healthcare, dependent care, and transit expenses at the point of service. The card allows you to avoid the traditional hassles of flexible benefit plans such as paying cash for services (in addition to your payroll deductions), filling out and submitting a claim form, and waiting for a reimbursement check.

In many cases you won’t have to send a receipt, because with the Benefits Card, your purchases will be auto-substantiated at thousands of retailer locations nationwide. However, it is important to save your receipts in case your plan administrator needs to verify the purchases.
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How do I acquire a Section 125 claim form? 

Go to the forms section of this part of the site or click here to acquire one in PDF format. Back to Top

    
Copyright 2016 by David K. Young Consulting, LLC (DKY)