FAQ
A detailed guide to Section 125, tax savings,
and the benefits around HealthCues.
A Section 125 plan is part of the IRS code that enables and allows employees to take taxable benefits, such as a cash salary, and convert them into nontaxable benefits. These benefits can be deducted from an employee's paycheck before taxes are paid. Cafeteria plans are particularly good for participants who have regular expenses that are related to medical issues and child care.
Employees who are enrolled in a Section 125 plan can set aside insurance premiums and other funds pretax, which can then go toward certain qualified medical and childcare expenses. Depending on where they live, participating employees can save from 20% to 40% in combined federal, state, and local taxes on a variety of items that they typically already purchase with out-of-pocket post-tax funds. Employers can save an additional 7.65% on their share of payroll taxes.
Employees who are enrolled in a Section 125 plan can set aside insurance premiums and other funds pretax, which can then go toward certain qualified medical and childcare expenses. Depending on where they live, participating employees can save from 20% to 40% in combined federal, state, and local taxes on a variety of items that they typically already purchase with out-of-pocket post-tax funds. Employers can save an additional 7.65% on their share of payroll taxes.
Section 125 plans have been around since 1978. This particular plan came about near the end of 2015. Although not new, these plans are becoming much more popular in the market place.
A wide variety of medical and childcare expenses are eligible for reimbursement under a Section 125 plan. Dozens of eligible expenses for medical items and treatments can be reimbursed.
Eligible expenses include acupuncture, treatment for alcoholism, ambulance services, birth control, chiropractic services, dental and doctors' fees, eye exams, fertility treatment, hearing aids, long-term care services, nursing homes, operations, prescription drugs, psychiatric services, sterilization, wigs, and wheelchairs.4
There's also a large variety of eligible over-the-counter items. Allergy medicines, cold medicines, contact lens solutions, first-aid kits, pain relievers, pregnancy tests, sleeping aids, and throat lozenges are among the dozens of eligible items.
Eligible expenses include acupuncture, treatment for alcoholism, ambulance services, birth control, chiropractic services, dental and doctors' fees, eye exams, fertility treatment, hearing aids, long-term care services, nursing homes, operations, prescription drugs, psychiatric services, sterilization, wigs, and wheelchairs.4
There's also a large variety of eligible over-the-counter items. Allergy medicines, cold medicines, contact lens solutions, first-aid kits, pain relievers, pregnancy tests, sleeping aids, and throat lozenges are among the dozens of eligible items.
A wide variety of medical and childcare expenses are eligible for reimbursement under a Section 125 plan. Dozens of eligible expenses for medical items and treatments can be reimbursed.
Eligible expenses include acupuncture, treatment for alcoholism, ambulance services, birth control, chiropractic services, dental and doctors' fees, eye exams, fertility treatment, hearing aids, long-term care services, nursing homes, operations, prescription drugs, psychiatric services, sterilization, wigs, and wheelchairs.
There's also a large variety of eligible over-the-counter items. Allergy medicines, cold medicines, contact lens solutions, first-aid kits, pain relievers, pregnancy tests, sleeping aids, and throat lozenges are among the dozens of eligible items.
Eligible expenses include acupuncture, treatment for alcoholism, ambulance services, birth control, chiropractic services, dental and doctors' fees, eye exams, fertility treatment, hearing aids, long-term care services, nursing homes, operations, prescription drugs, psychiatric services, sterilization, wigs, and wheelchairs.
There's also a large variety of eligible over-the-counter items. Allergy medicines, cold medicines, contact lens solutions, first-aid kits, pain relievers, pregnancy tests, sleeping aids, and throat lozenges are among the dozens of eligible items.
In a Section 125 plan the employee is paying for the benefits. The money is usually moved from the company’s payroll provider to the ultimate vendor.
Section 125 plans offer employers a lot of tax-saving benefits. Employers save on the Federal Insurance Contributions Act (FICA) tax, the Federal Unemployment Tax Act (FUTA) tax, the State Unemployment Tax Act (SUTA) tax, and workers' compensation insurance premiums for each participant in the plan. Combined with the other tax savings, the Section 125 plan usually funds itself because the cost to open the plan is low.
As an added advantage, employees receive an effective raise without any additional cost to the employer. More participants in the plan equate to more tax savings for the employer so the employer is often encouraged to contribute to each employee's plan to promote increased participation by those who are not yet in the Section 125 plan.
As an added advantage, employees receive an effective raise without any additional cost to the employer. More participants in the plan equate to more tax savings for the employer so the employer is often encouraged to contribute to each employee's plan to promote increased participation by those who are not yet in the Section 125 plan.
There is no cost. We help companies set up a Section 125 plan if needed.
To incentivize employees to purchase benefits for themselves. The healthier an employee is the less money the government is going to have to pay when that person is on Medicare.
The primary benefit is also tax-related for employees. A participant can typically expect to save 20% to 40% of every dollar put into the plan.3 The amount that the employee decides to put into the plan must be chosen each year. The "election" amount is deducted from the employee's paycheck automatically for each payroll period.
For example, $25 per pay period is automatically deducted tax-free if an employee elects to have $600 per year deducted from their pay and placed into the plan and the company has 24 pay periods. The money is sent to the plan's third party administrator to be held. It can then be distributed for reimbursement upon request for qualified expenses.
For example, $25 per pay period is automatically deducted tax-free if an employee elects to have $600 per year deducted from their pay and placed into the plan and the company has 24 pay periods. The money is sent to the plan's third party administrator to be held. It can then be distributed for reimbursement upon request for qualified expenses.
Section 125 was added to the Internal Revenue Code in November 1978. Internal Revenue Code Section 125 sets forth the requirements and tax treatment of cafeteria plans. Section 125 has been amended multiple times since its enactment.
Section 125 of the IRC prohibits employers from favoring highly compensated individuals and key employees when it comes to eligibility, benefits and utilization under the plan. Annual nondiscrimination tests are required to ensure compliance unless a safe harbor exemption applies.
The plan can be made available to employees, their spouses, and their dependents. Former employees are also allowed access, but the plan can't exist primarily for such people. The following do not qualify: self-employed individuals, partners within a partnership, and shareholders who own more than 2% of a subchapter S corporation
A Section 125 Cafeteria Plan is an employer-sponsored benefits program that lets employees pay for certain qualified medical expenses, such as health insurance premiums, on a pre-tax basis. An FSA and HSA are part of a Section 125 plan. Both the FSA and HSA plans allow employees to set aside money on a pre-tax basis to pay for qualified medical expenses. The HealthCues indemnity program pays for the premium for the program every month. There is no money left over at the end of the month to use for other expenses. It is termed use it or lose it.
I think I would stay away from this question. The answer would be yes.
A Section 125 plan typically lets employees use pretax money to pay for health insurance premiums for medical, dental, and vision. Other options include retirement deposits, supplemental life or disability insurance, Health Savings Accounts, and various medical or dependent care expenses.
This would become part of your current Section 125 plan.
It shouldn’t affect any of your current insurance. We aren’t looking to replace anything.
More than likely your current broker does not offer this type of plan or they would have already approached you about it. We are not trying to replace your broker.
This is a four-week implementation. We manage the enrollment, education of employees, and work directly with your in-house payroll or payroll provider to set everything up.
Fill out paperwork. Set up a payroll call with your payroll team. Start the enrollment process. This whole process takes four weeks. We have the marketing material that will go out to all the employees.
There aren’t any costs to set this up or run the program.
We roll the program out to employees. Our enrollment team does all the education of employees and they are available for questions from employees as long as the client works with us.
Most employers offer Section 125. Those that don’t should think about it to stay competitive.
There aren’t any risks or drawbacks.
120 employers and 19,000 employees
The employer pays on behalf of the employee. Technically it is the employee’s money.
We charge $35 PEPM. That administration fee is prorated and only charged if the employee on for each specific pay period.
This is a fully insured hospitalization plan. An insurance carrier wrote this program on their paper and had to get it approved by the Department of Insurance in each state.
Site Map
Useful Links
Schedule a 5-minute Interactive Demo
Tailored to CEO, C-suite, and HR decision-makers.
- (866) 308-3393
- hello@healthcues.com