What is a Cafeteria Plan?
A Cafeteria Plan is another name for a flexible spending plan and is a voluntary plan which provides you the choice of receiving your full compensation in cash or converting part of your compensation into tax-free benefits. Participants have their choice from a menu of benefits to elect from, just like a menu at a cafeteria. Hence the name “Cafeteria Plan”.
If I elect to redirect my compensation, how can this benefit me?
The biggest advantage is the tax savings. Since a Cafeteria Plan uses pretax dollars for reimbursement of qualified expenses, you reduce your income taxes and social security tax by reducing your taxable salary.
If I redirect part of my pay, won’t I make less money?
No. Your net take-home pay will increase by the amount of tax savings.
Why should I participate in the Health Care FSA if I already have medical insurance?
The Medical Out-of Pocket Plan offers reimbursement of medical care expenses not reimbursed by insurance. Co-pays, deductibles, eyeglasses, orthodontia, as well as over the counter products for illness or injury are some of the more common expenses allowed.
Can I change or revoke my elections during the plan year?
Generally, no. However, if there is a qualified status change, a change in election consistent with that status change may be possible.
What documentation do I need to provide to be reimbursed for expenses I incur?
You will be provided with appropriate reimbursement forms. You can mail or fax the form along with appropriate receipts and documentation directly to TAG. You may also login to flexasap.com and submit for reimbursement under the participant login link.
What if I don’t use all of the money I redirect?
Careful review of expenses before making an election can eliminate any unused benefits. However, if you do have funds elected but unused at the end of the plan year, the law requires that they be forfeited back to the employer.
Are there any negatives that I should know about?
Yes. Because you are not paying any social security tax on the portion of your income that has been redirected, your social security benefits may be slightly reduced.