I.R.S. Section 125 - Cafeteria Plan

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Flow Chart

Frequently Asked Questions

 

It is a group of non‐taxable employee benefits offered to employees, regulated by Internal Revenue Service, under Section 125 of the I.R.S. Code. Employees must elect to participate or decline participation.  If you choose any part “B” or “C”, you are automatically enrolled in part “A”.

(A) Premium reduction for medical, dental and vision premiums deducted from your paycheck on a pre‐tax basis, thereby reducing your taxable income.  Any deductions for medical, dental or vision benefits will be pre‐taxed from your paycheck.

(B) Medical Reimbursement Account: You may have an amount deducted on a pre‐tax basis from your paycheck up to $2,600.00 a year. In order to receive reimbursement, you must submit a claim for eligible out of pocket expenses that are not reimbursed by other insurance or other reimbursement as stipulated by the I.R.S. Section 125 rules.(Documentation required). 

(C) Dependent Care Reimbursement Account: You may contribute up to $5,000.00 annually for a joint tax return or $2,500.00 for an individual tax return, deducted from your paycheck on a pre‐tax basis for reimbursement of eligible dependent care expenses. You will be required to submit a claim for eligible dependent care expenses as stipulated by the I.R.S. Section 125 rules. (Documentation required) Consult with your personal tax advisor regarding effects on tax filing.

 

When you first become eligible for benefits, effective the 1st day of the month, following 58 days of active employment, or during the annual Benefit Enrollments.  All Elections other than your first election will become effective January 1 of each calendar year.

Yes, however as a Cafeteria Plan participant, any dental or vision benefit you elected will be deducted from your paycheck on a pre‐tax basis.

Fill out a Medical Reimbursement Account Claim Form and submit required documentation to the medical plan claims administrator.

Fill out a Dependent Care Account Reimbursement Claim Form and submit required documentation to the medical plan claims administrator.

 

In general, the Internal Revenue Code(129(e) and 21(b) (2) requires that an expense satisfy each of the following requirements to be eligible for reimbursement:

1. Expenses will be reimbursed only after the care has been provided, and not when you, the participant, are formally billed, charged for or pay for the dependent care.

2. The expenses must be incurred by your during a period when you have a dependent or spouse who is a qualifying individual which is either: 
(a) A dependent of the Participant under age 13 for which the Participant is entitled to an income tax deduction; or
(b) A dependent or spouse, regardless of age, who is incapable for caring for him/herself who spends at least 8 hours a day in participant’s household.

3. The expense must be for the care for the ‘qualifying individual’, which you incur to enable you (and if applicable, your spouse) to be gainfully employed.

4. If the expenses are for services provided outside your household, at a Dependent Day Care Center that provides care for at least 6 non‐residents, it must: 
(a) Comply with all state and local laws;
(b) Charge a fee for providing the services.
Note: Special rules apply to divorced parents or married individuals living apart (IRS 21(e))

 
 

Yes, by  March 31, of the following year for all eligible expenses incurred during the previous calendar year.

You will forfeit the balance of the funds in your account at the end of the calendar year. “Use it or lose it”.

Yes, effective December 31, of the plan year you enrolled.
Note: If certain qualifying events occur during the year, per I.R.S regulations, you may elect to opt out of this plan within 31 days of event. Contact Risk Management for the qualifying events. 


Boon Chapman Claims Administrators

Go to the Boon Chapman Claims Administrators website

Section 125


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