Flexible Benefit Plans can help employers contain benefit costs, meet diverse employee needs through choice, increase employee satisfaction and improve morale, in addition to generating substantial tax savings for both the employer and employees. Flexible Benefits Plans also provide a framework in which your benefits can evolve to keep pace with changing needs. Through employer credits and/or salary “redirection,” employees purchase “qualified benefits”. Qualified benefits are benefits that may not be included in the employees’ gross income. A Fund is established to pay eligible expenses for the participating employees.
Section 125 allows payment of benefits for employer-sponsored group health insurance premiums, unreimbursed medical expenses, and dependent care assistance expenses. Qualified benefit payments are received by the participant through credits and/or salary redirection before:
- FICA taxes
- State Income Taxes (not all states)
- Federal Income Taxes
Flexible Benefit Plan costs can be paid by a wide variety of choices. Both employer and employee contributions may be used. Methods of payment include automatic employee credits, benefit trade off credits, life style credits, matured credits, non-taxable salary conversion, and taxable payroll deductions.