Savings for You and Your Employees
Take advantage of these important government-approved programs.
- Flexible Spending Accounts (FSA)
- Dependent Daycare Accounts
- Health Saving Accounts (HSA)
- Health Reimbursement Accounts (HRA)
- Commuter Benefit Accounts
What is a Flexible Spending Account (FSA)?
An FSA is a tax-savings section of a Cafeteria Plan in which participating employees can select qualifying benefits from a menu of choices. In most plans, the employee has the following options:
- To receive all compensation in cash.
- To direct a portion of his/her salary to an FSA.
With this choice, a portion of the employee’s salary is redirected and banked by the employer in an account maintained for the employee. When an expense is incurred for one of the qualifying benefits, the employee is reimbursed by the employer from the dollars in the banked account.
These reimbursements represent an additional benefit to the employee, as they can avoid federal, Social Security, and state and local taxes, where applicable.
What benefits can my company include in a Section 125 Plan?
Your company’s Cafeteria Plan can include any combination of the following:
- Health insurance plan premiums (employee paid portion) including a high deductible health plan (HDHP), and other employer-sponsored insurance coverages, dental insurance premiums, disability,* accident benefits,* and group -term life insurance premiums.**
- Medical expenses not covered by insurance. Typical expenses include eyeglasses, medical examinations, dental/vision care expenses and insurance deductibles and co-payments for the employee and his/her family, up to $2,750 per year. (2020 amount)
- Adult and child day care expenses. The cost to care for a dependent while the employee and spouse (if married) work, up to $5,000 per year.
- Health Savings Accounts (HSAs) and HDHPs may be offered as options under the cafeteria plan. Thus, an employee may elect to have amounts contributed as employer contributions to an HSA and HDHP on a salary-reduction basis. The limit is $3,550 for Individuals and $7,100 for Families per year (2020 limits).
- Limited FSA. The Health FSA is limited to covering dental and vision care, up to $2,750 per year (2020 amount). This benefit is limited to HSA account holders.
*If disability insurance is paid for on a pre-tax basis, any benefits received are taxable to the employee. Under most circumstances, it is recommended that disability insurance not be included in the Premium Only Plan.
**Group-term life insurance up to $50,000 coverage.
Note: Insurance products with return of premium or benefits building features cannot be paid for on a pre-tax basis.