Section 125 Fsa

These changes extend the claims period for health flexible spending arrangements fsas and dependent care assistance programs and allow taxpayers to make mid year changes.

Section 125 fsa. Section 125 plans afford you the opportunity to use pre tax dollars to pay for your health care expenses from premium payments to qualified medical dental and vision expenses. Section 125 i provides that a health fsa is not treated as a qualified benefit unless the cafeteria plan provides that an employee may not elect for any taxable year to have salary reduction contributions in excess of 2 500 made to such arrangement 3. Section 125 cafeteria plans also provide several important advantages to employers especially those who own a small business.

While this is a great benefit for the employee it poses a potential risk to the employer. A case in point is when an employee terminates with a negative balance in their medical fsa. These benefits may be.

Ir 2020 95 may 12 2020 the internal revenue service today released guidance to allow temporary changes to section 125 cafeteria plans. As a result the employer s fica futa suta and workers compensation costs are also lower. This aspect of section 125 allows an employee to be reimbursed for qualified medical expenses that exceed their contributions to date.

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. Reduced payroll taxes for employees who participate in the 125 cafeteria plan.