Section 125 qualified plans allow plan sponsors to offer employees, their spouses, and dependents certain pre-tax benefits, lowering the employee’s taxable income. These plans essentially put more money back into the employee’s pocket, which can help employers attract and retain talent.
Health Savings Accounts (HSA)
An HSA account is owned by an employee. The account can be funded with employee and employer contributions. Money saved in an HSA is not treated as taxable income. Employees can use these funds to pay for doctor visits, medical supplies, and other out-of-pocket expenses, like vision and dental care.
Health Reimbursement Accounts (HRA)
The employer owns an HRA account and deposits a predetermined amount each year for qualified healthcare expenses, such as copays, flat doctor or specialist fees, and medical supplies. The money the employer contributes to the HRA is not taxed as part of the employee’s income.
Flexible Spending Accounts (FSA)
An employee can contribute pre-tax funds to an FSA and use the funds to pay for doctor visits, out-of-pocket costs, medical devices, and prescription medications.
Dependent Care FSA Accounts (DCFSA)
A DCFSA is an account made up of pre-tax dollars and can be used to pay for eligible dependent care services, including preschool, summer day camp, before or after-school programs, and child or adult daycare.
Commuter Benefits Accounts
A Commuter Benefits Account includes both Transit Spending Accounts (TSA) and Parking Spending Accounts (PSA); these are employer-sponsored benefit plans designed to allow employees to deduct pre-tax payroll dollars to save and pay for work-related commuting and parking expenses
Limited Purpose Flexible Spending Accounts (LPFSA)
An employee can contribute to an LPFSA while also contributing to a HSA. The funds are only available for out-of-pocket dental and vision expenses.