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How Do Cafeteria Plans Operate and Provide Tax Savings
One of our qualified representatives first enrolls the employee and helps them determine their eligible benefit amounts. Next, the employee elects to reduce their salary by an amount of these eligible expenses on a pre-tax basis. The amounts elected for health premiums, medical expenses and dependant child care are not subject to Federal Withholding or FICA, including FICA matching.
How Can BAC Help You with Installation of the Cafeteria Plan
We assist our clients in the establishment and installation of Section 125 Cafeteria Plan. Our services include plan documentation and annual enrollment meetings. At BAC, we make sure that election forms are signed prior to the plan year and that SPDs are delivered within 120 days of implementation. We handle all the details.
Cafeteria Plan Operations
Payroll reductions occur every pay period and those amounts cannot change during the year without a change in family status. Claims are submitted with valid receipts and are reimbursed at each pay period or within 72 hours depending on your service agreement. Medical reimbursement FSAs must incorporate the “Insurance Risk” rule
Employer Risk Rule Example
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An employee elects $25 to be deducted per pay period for a total of $600 per year
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In January, the employee turns in an expense of $600
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The plan must reimburse the $600 and allow the employee to pay back the plan at $25 per pay period for the remainder of the year
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If the employee leaves before the entire $600 is re-paid, the plan is short the advance, thus the “risk” involved
Employee Risk Example
- An employee elects $25 to be deducte4d per pay period for a total of $600 per year
- The employee only turns in valid receipts for $500 in that same year
- The employee will forfeit the remaining $100 to the plan
The VISA Benny Card Program
Our Benny Card program allows participants, through a VISA card, the ability to pay for qualified expenses directly. This allows eligible expenses to be deducted from the account balance at the point of sale. All transactions are fully substantiated with no follow up paperwork needed. The card can also be used in response to a “balance due” notice from a hospital doctor, dentist or vision provider. BAC uses auto-substantiation technology to electronically verify the transactions eligibility according to IRS rules. If a transaction is auto substantiated (authorized expense which is 85-95% of the time), no further action is necessary. Otherwise, the cardholder will receive a letter or email requesting a receipt to verify the expense.
Fast Integrated Install
The Benny Card integrates with an existing benefits program. We can use an employer’s standard eligibility for speed and convenience. BAC partners with the employer to communicate to employees regarding promotion and education. We also support substantiation and provide list carriers and plan copayment to employees by plan. This allows for convenient finance/treasury engagement for pre-funding and replenishment.
Why is BAC the Right Choice for your Section 125 Plan with the Visa Benny Card Program
We have industry leading auto substantiation rates between 85% and 95% across our entire book of business. We also allow employers the ability to “stack” multiple accounts on a single card. Combined with our comprehensive communication strategy and card conversion expertise, we can help increase your employee enrollment.
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