Section 125 Cafeteria Plan
With a section 125 Cafeteria Plan, you can use pre-tax dollars to pay for your health care expenses. Everything from premium payments to qualified medical, dental, and vision expenses. There are 3 primary types of Cafeteria Plans:
- Premium Only Plan (POP)
- Flexible Spending Account (FSA)
- Dependent Care Assistance Plan (DCAP)
Premium Only Plan (POP)
When paying for any portion of your health insurance premium, a POP will deduct your portion from payroll on a pre-tax basis - resulting in lower employee taxes. This is the most common component of all Cafeteria Plans. It is often used in conjunction with Flexible Spending Accounts and Dependent Care Assistance Plans.
All eligible plans are limited to the employer's group plan(s), including medical, dental, vision, and a number of voluntary products.
Flexible Spending Account (FSA)
MedFlex accounts allow you to set aside a portion of your paycheck to help you pay for medical expenses normally not reimbursed, excluding elective cosmetic services. Contributions are deducted from your paycheck prior to state and federal taxes.
A Healthcare FSA could save you money if you or your dependents:
- Have out-of-pocket expenses like co-pays, coinsurance, or deductibles for health, prescription, dental or vision plans
- Have a health condition that requires the purchase of prescription medications on an ongoing basis
- Wear glasses or contact lenses or are planning LASIK surgery
- Need orthodontia care, such as braces, or have dental expenses not covered by your insurance
Dependent Care FSA
A Dependent Care FSA provides pre-tax reimbursement of out-of-pocket expenses related to dependent care. This benefit may make sense if you (and your spouse, if married) are working or in school, and:
- Your dependent children under age 13 attend daycare, after-school care or summer day camp
- You provide care for a person of any age whom you claim as a dependent on your federal income tax return and who is mentally or physically incapable of caring for himself or herself
IRS regulations allow up to $5,000.00 per calendar year per family. Certain age limits apply.
Card holders can use their Benny™ Card to pay for eligible items at an IIAS merchant that accepts MasterCard™ or VISA™. Eligible expenses are deducted from the account balance at the point of sale.
Transactions are fully substantiated and, in most cases, no paper follow-up is needed. The card can also be used to pay at hospital, medical, dental, or vision providers that accept major credit cards. When making purchases at a pharmacy that uses IIAS technology, the merchant's system automatically recognizes and separates FSA-eligible from non-eligible purchases.
Eligible purchases can be placed on the card and the consumer is simply asked for an alternative payment method for ineligible items.