AN OVERVIEW OF IRS SECTION 125 PLANS
How our Beniversal flexible benefit plans work
IRS Section 125 Plans give employees the opportunity to pay for eligible medical and dependent care expenses on a tax-free basis. Contributions are made before federal income taxes, Social Security taxes, and most state income taxes are calculated.
Eligible medical expenses may be paid for with a Beniversal MasterCard card or be reimbursed by submitting a claim form. There are several types of Section 125 Plans:
Tax-free Insurance Premiums Plan
Employees can use tax-free funds to pay for group insurance premiums offered by their employer, including:
- medical insurance
- dental insurance
- vision care insurance
- group term life insurance
- long-term/short term disability insurance
- accidental death and dismemberment insurance
Beniversal Medical Flexible Spending Account
Employees can pay for a wide range of out-of-pocket medical expenses with tax-free dollars. Eligible expenses may include:
- co-payments
- deductibles
- prescription drugs
- dental care
- vision care, eyeglasses, contact lenses
- chiropractic care
- psychological counseling
- over-the-counter items
Here's a sample OTC Chart.
Employers set the annual limits for employee contributions to Medical FSAs.
Beniversal Dependent Care Flexible Spending Account
Employees use tax-free dollars to pay for dependent care that enables employees and their spouses to work, look for work or attend school full-time. Eligible expenses include day care or after-school care for a child under the age of 13 or care for a spouse or adult dependent who is physically or mentally incable of self-care.
The federal government sets the annual limit for contributions to Dependent Care FSAs.
Flexible Benefit Plans
Another option within IRS Section 125 Plans is to offer "benefit credits" which employees can use to purchase certain benefits. Benefit credits can be structured so that employees can purchase certain core benefits to deposit into Flexible Spending Accounts, to buy other insurance coverage or even to be paid in cash. We will gladly consult with you about setting up a customized program that fits your specific needs.
The Mechanics of Tax-Free
Employees wishing to enroll in a flexible benefit plan calculate how much money they wish to have deducted from their paycheck before taxes are calculated. This is done annually during the open enrollment period or when an employee first joins your company. We provide worksheets for employees to calculate their spending, or they can use our online Tax Savings Calculator.
The employer sends the payroll records and employer funds to Benefit Resource, which then uses them to pay qualified Plan expenses.
Simple Enrollment
Employees can enroll online or by using paper forms - you decide. You transfer payroll data to us once and then you're done - we handle the rest.
Questions about Section 125 Plans? Contact us.