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Flexible Spending Accounts Offering flexible spending accounts is a great way to help your employees pay medical and health expenses that they know they will incur during the year, while also reducing their total taxable income. These accounts work in conjunction with employer-sponsored health plans to help pay for additional expenses not covered under those plans. But how exactly do these plans work? Employees contribute to their flexible spending accounts through a payroll deduction plan. These deductions are made on pre-taxed income and therefore are not subject to income or social security tax withholdings. An employee, in order to pay for medical expenses, can then access these funds. There is no set contribution for these plans and individuals can decide based on their personal needs and budgets how much to contribute to these accounts for the year. In addition to employee contributions, employers can also contribute to flexible spending accounts. Flexible Spending Accounts - Giving Employees More Control over Their Health Care Flexible spending accounts fall under the 125 section of the Internal Revenue Code and are sometimes referred to as "125 plans" or "cafeteria plans." Under this provision, health care, dental and vision care, not included under other insurance plans, along with adoption assistance, and daycare expenses can be covered. With recent tax law changes, coverage under such plans has expanded to include even more. One such example is the inclusion of over-the-counter medications in flexible spending account benefits. Previously such plans only covered prescription drugs. But under the new law, items such as aspirin, cold and allergy relief medications would also be covered. This greatly expands the benefits offered by such employer-sponsored health care programs, without costing more than traditional plans. |
Additional Topics Consumer-Directed Health Plans Consumer-Driven Health Accounts Dependent Care Flexible Spending Accounts Flexible Health Spending Accounts Flexible Medical Expense Accounts Health Care Flexible Spending Accounts Health Reimbursement Arrangements IRS Section 125 Cafeteria Plans Medical Expenses and Income Tax Plan for Medical that Health Insurance Doesn't Cover Save 25% to 40% on Health Expenses Save on Co-Pays and Over-the-Counter Medications Save on LASIK and Orthodontic Costs Section 125 Plan Administration |
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