BASE^® Blog

According to Entrepreneur, one of the most underrated and underused employee benefits available for small businesses today is outlined in Section 125 of the U.S. tax code - the Cafeteria Plan.

BASE® offers 4 plans to further customize an employer's current benefit offering... and no, we aren't talking about bringing food to eat!  These 125 Cafeteria Plans:  Premium Only Plans (POP), Flexible Spending Account (FSA), Limited Purpose FSA, and Dependent Care Assistant Plan (DCAP) can further supplement your current Health Reimbursement Arrangement (HRA).  Employers that sponsor a BASE® 125 Cafeteria Plan allow employees, who are paying for medical expenses, insurance premiums, or dependent care expenses, to do so on a pre-tax basis.

Premium Only Plan (POP) - Premium Only Plans are established to pay for employer-sponsored benefits.

With a POP, individuals set aside money which can be used for medical, dental, vision, group term life, and voluntary supplemental insurance

Flexible Spending Account (FSA) - Flexible Spending Accounts are established to pay for qualifying medical expenses.

With an FSA, individuals set aside money which can be used for copays, dental care, vision care, chiropractor, and prescriptions.  100% of the FSA election is available on day one to employee participants. 

Limited Purpose FSA- Limited Purpose Flexible Spending Accounts are established to strictly reimburse eligible dental and vision care expenses.  This type of plan is for employees who are enrolled in a High Deductible health Plan (HDHP) and are enrolled in a Health Savings Account (HSA). 

With a Limited Purpose FSA, individuals set aside money to be used for only eligible dental and vision care expenses, include orthodontia.  The employees have the opportunity to build contribution amounts to their HSA while still receiving a pre-tax benefit for eligible dental and vision expenses. 

Dependent Care Assistant Plan (DCAP) - Dependent Care Assistant Plans are established to pay for qualifying adult or child care expenses. 

With a DCAP, a person can set aside money to use for childcare or daycare costs, adult daycare, before or after school programs, or summer programs or camps.  It can be used for care when it is provided while parents are working or at school.  100% of DCAP election is NOT available on day one to employee participants.

Advantages of the Cafeteria Plan

A BASE® 125 Cafeteria Plan can create savings for both the employer and employee.  Employees will see an increase in take-home pay due to the taxable income being reduced; it is a convenient way to save and budget for eligible healthcare and daycare expenses, and know that as they continue to work, they are establishing funds to help pay for these costs.  Employers will see more because the pre-tax benefits aren't subject to the Federal Social Security (FICA) tax, Medicare, as well as, Federal Unemployment tax (FUTA). 

BASE® provides:

• Web Portal for both Employer & Employee
• Summary Plan Document (SPD) & Plan Documents
• Adoption Agreement (AA)
• Administrative Guidelines & Forms
• Claims Substantiation
• Option for Employer to Reimburse Via Direct Deposit or Check
• HIPAA Privacy
• Non-Discriminatory Plan Designs
• On-Going Compliance & Product Updates
• Service & Support

No matter what kind of business structure you may have, BASE® can help you customize your 125 Cafeteria Plan that will benefit BOTH you, the employer, and your employee.  Contact us today to learn more about the benefits of a 125 Cafeteria Plan and other money saving benefit strategies.

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