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Types of Plans
Home » Insurance » Cafeteria Plans » Types of PlansMedical Flexible Spending Account: This account allows participants to utilize the pre-tax money to pay for expenses that are not generally covered under your medical plan. Deductibles, co-insurance amounts (co-pays), and even cosmetic surgery can be paid through the cafeteria plan funds. The employee can be employer contributions or salary reduction amounts allocated by the employee. The money can be used to pay out of the pocket medical or dependent care expenses. The advantage to the flexible spending account allows you to pay for expenses you would be responsible for anyway with pre-taxed dollars instead of after-tax dollars. The coverage lasts 12 months except for a short plan year or it becomes defunct if the employee fails to make contributions. Proof of the expenses has to be provided before reimbursement occurs. Usually, a doctor's receipt is sufficient. A medical flexible account cannot be used to pay premiums for health insurance including health insurance that is provided by the employer or the spouse's employer.
Dependent Care Flexible Spending Accounts: The dependent care flexible accounts must be for qualifying persons. A dependent, a spouse who cannot care for him/herself or a dependent who was physically or mentally not able to care for him/herself and you claim as a dependent are considered qualifying people. You must also decide which route to take when claiming your children. The decision must be made if it is more beneficial to participate in the flexible spending account or to take the children care credit on your Federal Income Tax return. Your child is your dependent if the child is under 13. If he/she is over 13 then the child must depend on you for at least half of their support. They must spend at least eight hours a day in your household and is physically or mentally unable to care for themselves.
Premium Only Plans: This type of cafeteria plans can have their salary reduced pre-tax to pay medical premiums. Employers can ask the employees to contribute a portion of money to the premiums for health, disability or term life insurance policies. Since this money is easy to know at the beginning of a plan year, then the risk to the employee contributing too much money is not an issue. This plan is easy to implement and inexpensive.
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