Flexible Spending Accounts

Flexible Spending Accounts (FSAs) / Cafeteria 125 Plans

With a considerable portion of operating budgets going toward employee-related expenses, it seems logical to look for ways to control those costs. That is why businesses today view Human Resource cost containment as an important part of their business model. The IRS Section 125 Cafeteria Plan, also known as a Flexible Spending Account (FSA), offers a simple method of reducing employee costs as well as costs to the employer.

The alt Bentley Yates and All American Benefits Cafeteria Plan is both IRS approved and qualified.

An IRS Section 125 Cafeteria Plan is not related to any other benefit plan now in place. It does not affect or change coverage's under existing plans.

What does the IRS Section 125 provide?

The Cafeteria Plan, or FSA, provides that certain employee expenses can be paid with pre-tax dollars. The allowable expenses are taken out of the employee's salary and returned to the employee without any tax or FICA contributions deducted from that amount. This results in increased take home pay for the employee and reduced payroll taxes for the employer.

To better illustrate this savings, an example has been provided below. In the example, the employee contributes $300.00 to the FSA for insurance premium, $25.00 for dependent care, and $75.00 for various other eligible unreimbursed medical expenses.

EMPLOYEE SAVINGS

Without Cafeteria Plan

Gross Monthly Salary


Taxable Monthly Salary

Less Taxes and
Section 125 Expenses

Federal Income Tax
Social Security (FICA)
Monthly Health Insurance
Monthly Child Care
Monthly Dental Expense
Monthly Medical Expense
Monthly Private Premium
Monthly Public Transportation
Monthly Parking @ Work


Take Home Pay



3,000.00


$3,000.00




840.00
229.50
300.00
25.00
0.00
75.00
0.00
0.00
0.00


$1,530.50


With Cafeteria Plan

Gross Monthly Salary
Less Salary Reduction


Taxable Monthly Salary

Less Taxes and Benefits


Federal Income Tax
Social Security (FICA)
Monthly Health Insurance
Monthly Child Care
Monthly Dental Expense
Monthly Medical Expense




Take Home Pay



3,000.00
400.00


$2,600.00




728.00
198.00
0.00
0.00
0.00
0.00




$1,673.10

Take Home Pay Increase: $142.60 per month or $1,711.20 per year.


EMPLOYER SAVINGS

Without Cafeteria Plan

Gross Monthly Salary
FICA - 7.65%
Workers Comp - 5.00%




Total Payroll Costs Before



3,000.00
229.50
150.00




$3,379.50


With Cafeteria Plan

Gross Monthly Salary
Less Salary Reduction
Taxable Salary
FICA - 7.65%
Workers Comp - 5.00%
Section 125 Payment


Total Payroll Costs After



3,000.00
400.00
2,600.00
198.00
130.00
400.00


$3,328.90

Annual Employer Savings for EACH Participant is: $607.20

alt Bentley Yates and All American Benefits will, at no charge, produce a feasibility study that will illustrate the impact of such a plan for your company. A few things we will discuss include:

  1. increased earnings,
  2. improved employee morale,
  3. promoting employee loyalty to his/her employer and,
  4. all of which will result in yet another cost containment through reduced turnover

Debit Cards

With the use of the alt Bentley Yates and All American Benefits sponsored Benny™ Prepaid Benefits Card and the MySource card, employees will no longer have to wait on their FSA funds to be reimbursed. Rather than having to fill out claims forms and waiting on manual checks, participants will receive preloaded debit cards giving them instant access to their funds at the point of service, eliminating the need for employees to pay cash for eligible expenses. The Employee will be able to monitor his/her spending by logging on to a dedicated web site. Read more about this advanced service here! <Link to FSA Benny Card>

What Are the Advantages?

To The Employee:

The alt Bentley Yates and All American Benefits Cafeteria Plan provides the ability for employees to deduct pre-tax funds from their paychecks to be used for IRS allowable medical, childcare, and adult care costs.

• Substantial Financial Benefits

Employees enjoy added benefits for themselves and security for their families without any reduction in take home pay.

• Increased Retirement Benefits

Employees are shown the advantage of using tax savings to provide additional retirement income for themselves and their families.

• Fully Vested From Day One

To The Employer:

No matter the size of your Company, you can take advantage of your rights to offer benefits under Section 125 and establish a Cafeteria Plan.

• Immediate Payroll Savings

For the average employer, the savings are 13%. Using the national average, this savings totals approximately $500.00 per participating employee per year.

• Increased Employee Morale

Providing a substantial financial benefit package strengthens morale. The Cafeteria Plan greatly enhances benefits without incurring costs.

• Improves Employer Image

The employees receive a substantial financial benefit package sponsored by the employer with no cost to neither the employer or employee.

What types of Cafeteria Plans are available?

alt Bentley Yates and All American Benefits offers three types of Cafeteria Plans:

  1. Premium Only Plan (POP) wherein premiums are paid by the employees through salary reduction. The reduction in employers matching contribution (7.65%) and in payroll based Workers' Compensation Premium will go straight to the bottom line as a benefit to the employer. The resulting FICA reduction and the federal and state tax withholding reduction on the employee side will cause employees to increase their take home pay.
  2. Kiddie POP. The same as the POP Plan described above except this plan allows for a salary reduction for childcare with commensurate reductions in employer matching FICA and Workers' Compensation Premium and employee FICA and tax withholding.
  3. Cafeteria Plan. Combines POP, Kiddie POP with all other medical expenses not paid for by insurance. This Plan is a real "Working Person's Tax Shelter" that earns more money for both the employer and employee.

A successful Employee Benefit program must be profitable for both the employer and for the employee, and our programs are designed to be a win-win for everyone involved.

Flexible Spending Accounts 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.

Tax-Free Insurance Premiums Plan

Employees can use tax-free funds to pay for group insurance premiums offered by their employer, including:

  • Health Insurance
  • Vision Insurance
  • Dental Insurance
  • Group Term Life
  • Disability Insurance
  •  

Dependent Care Account

Employees can use tax-free dollars to pay for dependent care, which enables employees and their spouses to work, look for work, or attend school full time. The federal government has an annual limit of $5,000.00 per year for contributions to dependent care FSAs. It is called dependent care and not childcare because it can also be used for a disabled spouse or care for an elderly parent or relative.

Unreimbursed Medical Account

Employees can pay for a wide range of out-of-pocket medical expenses with tax-free dollars. The list of eligible expenses is ever changing, so there is no all inclusive list of eligible items. The IRS has provided a definition; it reads " if the purpose of your purchase has the purpose of preventing or alleviating pain, sickness or injury, then it is considered an eligible medical expense. Examples include:

  • All over-the-counter drugs (with LOMN)
  • Contact Lenses
  • Medical Equipment
  • Laser Eye Surgery
  • Deductibles
  • Dental Work
  • Coinsurance
  • Eye Glasses
  • Co-pays
  • Orthodontics
  • Chiropractic
  •  

We have compiled a list of eligible out-of-pocket medical expenses which is available from our Participants Download Services or by clicking here. This list does not pretend to be all-inclusive.

The alt Bentley Yates and All American Benefits administration of your Cafeteria Plan also includes Section 131 at no additional charge. The following describe what is included in Section 131:

Public Transportation Account

Employees can pay for public transportation, up to $1,560 per year, with pre-tax dollars, including:

  • Buses
  • Trains
  • Carpools of 3 or more @ $0.50 per mile

Parking Account

Employees and/ or their spouses responsible for paying to park while at work can do so with tax-free dollars up to a maximum of $3,000 per year.

Plan Open Enrollment

Your employees have the ability meet in groups with our experts where the Benefit program is explained in detailed to employees. The benefits are explored, and the IRS allowable deductions are detailed and discussed. At these meetings, enrollment forms are filled out under the guidance and supervision of our experts. Questions are invited and answered. These meetings last approximately 45 minutes to 1 hour.