Transcript Slide 1

Your Cafeteria Plan
Benefit
Cal State San Marcos
Foundation
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What is a Cafeteria Plan?
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Cafeteria Plans allow employees to
pay for company health insurance
premiums, health care costs and
dependent care costs with pre-tax
dollars
Without a Cafeteria Plan, you
receive your paycheck first, then
after Federal, State and FICA taxes
are deducted, you pay for those
expenses
How do I benefit?
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Using a Cafeteria Plan, you are
issued a paycheck from which your
insurance premiums, health care
costs and dependent care costs are
deducted before Federal, State and
FICA taxes
This results in a lower gross amount
of your income subject to taxes
Advantages?
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Under the Plan, you may elect to
receive benefits on a tax free basis.
The amount you pay, or spend for
group insurance premiums, “out of
pocket” medical expenses, as well
as child or dependent care
expenses, is deducted from your pay
prior to the calculation of payroll
taxes (Federal, State & FICA)
This will in turn increase your net
spendable income
What does the Foundation’s
Cafeteria plan offer?
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Premium Only Plan (POP)
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Allows you to elect to have your
insurance premiums deducted pre-tax
Reimbursement Accounts
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Allows you to set aside pre-tax dollars
each pay period to pay for Health and
Dependent Care expenses
Consists of two accounts:
1.
2.
Health Care Flexible Spending Account
(HFSA)
Dependent Care Flexible Spending
Account (DFSA)
Premium Only Plan
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If you pay a portion of the monthly
premiums for your medical
insurance, a cafeteria plan allows
you to pay for those premiums with
pre-tax dollars
Must elect this option on an annual
basis
If you pay no premiums monthly, no
need to elect this plan option
Complete a Salary Reduction
Agreement
Flexible Spending Accounts
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Health Care Flexible Spending
Account
Normal plan year is January 1st to
December 31st each year
 Complete the Flexible Spending
Account Enrollment Form
 Annual Maximum: $2,500
 Monthly Minimum: $25
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Health Care Flexible Spending
Account
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Amounts you spend for “out of pocket”
health care costs fall into this plan
Costs not covered by your other employee
benefits (examples include medical, dental,
vision insurances, and prescriptions)
Expenses must be incurred during the plan
year or by the end of the “grace period”
(i.e., by March 15th of the following year)
“Use it or lose it” program applies
For specifics, consult a tax specialist, a
CPA, or refer to IRS Publication 502
What types of Health Care
Expenses can I pay for?
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Co-pays
Insurance
Premiums
Deductibles
Dental Care
Vision Care
Orthodontia
Immunizations
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Chiropractor
Ambulance
Contact Lenses
Pediatrician
Psychiatrist
Prescriptions
Lab Work
Many, Many
More…
Flexible Spending Accounts
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Dependent Care Flexible
Spending Account
Normal plan year is January 1st to
December 31st each year
 Complete the Flexible Spending
Account Enrollment Form
 Annual Maximum: $5,000
 Monthly Minimum: $25
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How does the Dependent
Care Account Work?
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You may pay for dependent care expenses for
qualifying children and/or dependents incapable of
self care. Expenses must be incurred to allow you
and your spouse, if married, to work or attend
school
Child care expenses are allowable for children
under the age of 13. Costs for preschool are
generally allowable
The care can be provided within or outside your
home, but, services may not be provided by one of
your dependents
Services provided by a licensed day care provider
must follow requirements for the State in which the
provider is located
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Expenses must be incurred during the plan year or by the
end of the “grace period” (i.e., by March 15th of the
following year)
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“Use it or lose it” program applies
Dependent Care Continued
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Allowed pre-tax up to $5,000 per
calendar year if married filing
joint return or single filing single
return
Pre-taxing the expenses
precludes you from taking the
credit when filing your taxes
What is my potential savings?
The tax savings will depend on the employee deferral directed to the
Cafeteria Plan and the employee’s tax rate.
Without
Cafeteria Plan
With
Cafeteria Plan
$3,000.00
$3,000.00
Group Medical Insurance Premiums
$0.00
$75.00
Medical Costs
$0.00
$25.00
Dependent Care Costs
$0.00
$225.00
$3,000.00
$2,675.00
Federal Income Tax (15%)
$450.00
$401.25
State Income Tax (4%)
$120.00
$107.00
Social Security Tax (7.65%)
$229.50
$204.64
Insurance Premiums/Medical/Day Care
$325.00
$0.00
$1,875.50
$1,962.11
$0.00
$86.61
Gross Monthly Compensation
Less Pre-Tax Expenses
Compensation Subject to Taxes
Less Taxes and After Tax Expenses
Net Pay
Increase in Income Per Month
Increase in Income Per Year
$1,040
Bottom Line!
You can either continue to pay for
your expenses with earnings
after Uncle Sam has taken his
chunk…or you can pay those
same expenses with a portion of
your pay before taxes are
withheld! It is up to you to
decide!
Frequently Asked
Questions???
This sounds too good to be
true…is it?
Even though the benefits may
seem too good to be true, Federal
legislation passed in 1984 formally
recognized and adopted Cafeteria
Plans, which are regulated under
various sections of the Internal
Revenue Code
 See the IRS website at
www.irs.gov for further information
on Cafeteria Plans
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Are reimbursements taxable?
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Reimbursements for qualified
expenses are not taxable.
Under Code Section 125, these
pre-tax expenses are not
declared or reported for income
tax purposes, which means they
are not taxable now or when
filing your taxes!
Will this affect my other
benefits?
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Participation in the Plan will not
affect any other benefits you
may receive, or your ability to
participate in qualified plans (i.e.
retirement plans, etc…)
What does the phrase “use it
or lose it” mean?
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The plan is a “use it or lose it”
benefit, so a conservative approach
when estimating your pre-tax
expenses should be used. You will
have 30 days after the “grace period”
(i.e., 30 days after March 15th = until
April 14th) to claim any
reimbursements for the previous
plan year. Any expenses not
claimed will be forfeited. In other
words, “use it or lose it!”
What happens if I change
employers?
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The plan provides an extended
period of time for you to submit
claims for reimbursement to the
administrator
Do I have to pay for expenses
before I am reimbursed?
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No. Expenses are reimbursed
as they are incurred. It is not
necessary that they be paid first
(Incurred means the date the
service was provided/received
at the doctors, dentist – not the
date billed or paid)
What name is on the
reimbursement check?
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It is payable to you! The check
reimburses you/your family for
expenses you’ve incurred
How do I know what my
balance is?
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If you do not claim
reimbursements you will receive
your account statement at the
end of the third quarter of each
plan year, otherwise you will
receive statement information
with each reimbursement check
Can I change my pre-tax
amounts?
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The plan allows for
increases/decreases in election
amounts in the event of a
qualified job or family status
change. A qualified change may
include: marriage, divorce,
adoption, birth of a family
member, or a significant change
in employment status of spouse
May I claim expenses for my
family?
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Yes! The plan allows you to
receive reimbursement for
expenses incurred on you, your
spouse, and all eligible
dependents
What if I have other
questions?
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Call Flex Pensions at (562) 3082494
Or call Foundation Human
Resources at: (760) 750-4700
How do I sign up for the plan?
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See the following documents:
Instructions for Flexible Spending
Accounts
 Complete the Salary Reduction
and Enrollment Form
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Plan for your future…
During the benefit open
enrollment periods you have
options and decisions to make.
Take the time to review all the
available options you have. Use
your tax advantages wisely and
choose the best alternatives for
you and your family…
The End