Sometimes referred to as a Cafeteria Plan, Flex Plan, or a Section 125 plan — a Flexible Benefits Plan lets employees set aside a certain amount of each paycheck into an account — before paying income taxes. During the year, employees are reimbursed from this pre-tax account for healthcare and/or dependent daycare expenses.
When employees use tax-free dollars to pay for these expenses, they realize a substantial savings and an increase in spending power.
The company saves too – 7.65% (FICA match) on every dollar employees contribute to the plan.
Reimbursable expenses can include:
Deductibles, co-pays, and prescription drugs
Expenses not covered by insurance
Dental services & orthodontics
Eyeglasses, contacts, solutions & eye surgery
Weight-loss programs (dual use, requires a doctor’s prescription)
Psychiatric care & Psychologist’s fees
Mileage for healthcare
Over-the-counter drugs that are medically necessary with a doctor’s prescription
All non drug over-the-counter (OTC) items
Adult & child daycare service
Limited Flexible Spending Account (LFSA)
Some employers offer both a Limited Flexible Spending Account (LFSA) and a Health Savings Account (HSA). If you are enrolled in an HSA, you might also be able to enroll in an LFSA. An LFSA is similar to a regular FSA in that it lets you set aside money on a pre-tax basis for healthcare expenses. However, it is limited to dental and vision expenses so it complies with HSA guidelines.