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Section 125 Flex Administration
We offer Flexible Spending Administration (Cafeteria Plan/Section 125) to our customers.
Employee satisfaction is what every company strives
for when developing a benefit plan for their employees.
Empowerment, the ability to make decisions, to choose
among benefits, is one way to make sure your employees
remain satisfied.
Under Section 125 of the Internal Revenue Code, Flexible Spending Accounts (FSA) allow employees to pay for certain qualified benefits with pre-tax dollars. Having these benefits paid before FICA, state and federal taxes are calculated, can result in an increase of employee take-home pay and lower tax liability (for both the employer and the employee). Plans such as these have been among the most dramatic developments in employee benefit design in recent years. There are two types of Flexible Spending Accounts; a Dependent Care Account and a Health Care Account.
Dependent Care Accounts
Expenses that qualify for payment under Dependent Care Accounts are listed below:
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Services provided by a day care center that meets local regulations, provides care for more than six nonresidents and receives a fee for services (whether or not it is a for-profit center).
- The service provider must have a Tax Identification or Social Security Number and file taxes.
- Wages paid to baby-sitters and companions, including relatives (age 19 or older) whom you do not claim as exemptions on your federal income tax return.
- Care for disabled dependents who live with you. The dependent must be domiciled in your residence and claimed as exemptions on your federal income tax return.
- The FSA covers children under age 13 who can be claimed as exemptions on your federal income tax return.
- Dependents of any age (including parents) who are mentally or physically incapable of self-care and live with you can also be covered under the Dependent Care Account.
- Day Care or nursery school costs.
- Adult day care costs.
- Wages paid to a housekeeper for dependent care.
Health Care Accounts
Expenses that qualify for payment under Health Care Accounts are listed below:
- Deductibles
- Copayments
- Routine Health Exams
- Dental Expenses (orthodontics, bridgework, dentures, etc.)
- Vision Care (exams, glasses, contact lenses, corrective surgery, etc.)
- Fees above Reasonable and Customary
- Out-of-network charges not reimbursed by your medical plan
- Hearing Aids
- Prescription Drug charges, including copayments.
Flexible Spending Accounts are covered under Section 125 of the Internal Revenue Code. It is important to remember that IRS laws are very complex. While we hope the following information will be helpful in understanding Flexible Spending Accounts, this information is not intended to supply legal advice or to offer solutions to individual problems. Employers who require such advice should consult their own legal counsel.
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