DUNN INSURANCE GROUP INTRODUCES “Payroll Easy Link”SM 125 Plan
FLEXIBLE SPENDING ACCOUNTS
What is a cafeteria plan?
A cafeteria plan is a separate written plan maintained by an employer for employees that meets the specific requirements of and regulations of section 125 of the Internal Revenue Code. It provides participants an opportunity to receive certain benefits on a pretax basis. Participants in a cafeteria plan must be permitted to choose among at least one taxable benefit (such as cash) and one qualified benefit.
A qualified benefit is a benefit that does not defer compensation and is excludable from an employee’s gross income under a specific provision of the Code, without being subject to the principles of constructive receipt. Qualified benefits include:
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Accident and health benefits (but not Archer medical savings accounts or long-term care insurance);
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Adoption assistance;
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Dependent care assistance;
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Group-term life insurance coverage;
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Health savings accounts, including distributions to pay long-term care services.
The written plan must specifically describe all benefits and establish rules for eligibility and elections.
A section 125 plan is the only means by which an employer can offer employees a choice between taxable and nontaxable benefits without the choice causing the benefits to become taxable. A plan offering only a choice between taxable benefits is not a section 125 plan.
Stop overpaying your taxes and start a plan today.
Please click on the informaton below to learn more.
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