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 Section 125 and Section 132 Plans

Summary of Our Flex Services
Section 125 of the Internal Revenue Code allows employers to establish plans in which certain employee benefits can be 'purchased' by employees using pre-tax dollars.  These benefits include health insurance, life insurance as well as reimbursement of certain dependent care expenses and out-of-pocket medical expenses.

In addition, the Transportation Equity Act for the 21st Century (known as TEA-21) initially established and adopted by the U.S. Congress in 1999 allows employers to offer to their employees a pre-tax fringe benefit for qualified transportation under Section 132. Technically, this type of benefit cannot be included in your Section 125 plan document.  However, ERISA has the ability to administer your Section 132 benefits in tandem with your Section 125 benefits.

And, the best part for you as the employer....

           You will not have to pay FICA or FUTA taxes on the gross amount of salary redirection made by your employees !!
 
 ¢ Our Section 125 Plans
  
   Premium Only (POP) Plans  
 
Premium Only Plans, better known as "POP Plans," convert the employee’s cost of group insurance premiums from an after tax expense to a pre-tax expense via salary reduction. The premiums can be used for both the employee or dependent premiums.
 
   Flexible Spending Plans  
 
Flexible Spending Accounts, also known as FSAs allow employees to contribute untaxed salary to a reimbursement 'account' and then to receive those dollars back upon incurring certain expenses. A plan may include a medical reimbursement account or a dependent care reimbursement account, or both. The medical reimbursement is for certain health care expenses not covered 100% by your insurance carrier. The second is for dependent care expenses (child and/or senior care) if both you and your spouse work full time. FSA plans typically have a POP plan built into them as well.
 
 ¢ Our Qualified Transportation Plans
 
Employees can elect to pay for Qualified Transportation Expenses with tax-free dollars. Contributions which reduce taxable income are credited to an account. As the employee incurs eligible expenses, he or she may submit a claim for reimbursement. There are two types of accounts:Employees can elect to pay for Qualified Transportation Expenses with tax-free dollars. Contributions which reduce taxable income are credited to an account. As the employee incurs eligible expenses, he or she may submit a claim for reimbursement. There are two types of accounts:
 
   Mass Transit Account  
 
IRC Section 132(f)(5)(c) defines "qualified mass transit" as transportation in a commuter highway vehicle (ie. bus, train, subway, van pool) if such transportation is in connection with travel between the employee's residence and place of employment.
 
   Parking Account  
 
IRC Section 132(f)(5)(c) defines "qualified parking" as parking provided to an employee on or near the business premises of the employer or on or near a location from which the employee commutes to work by transportation for which a transit pass is used, in a commuter highway vehicle, or by car pool. Such term shall not include any parking on or near property used by the employee for residential purposes.

 

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