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Cafeteria Plan Options

These plans are three separate options under the Internal Revenue Code (IRC) Section 125, which may be elected separately or in combination to help lower your taxable income. Because cafeteria plans provide tax advantages, the federal government imposes strict rules and limitations on enrolling, making changes, or using these accounts. You should consult your tax advisor or the IRS for guidance on how cafeteria plans might affect your personal tax status. Please use careful consideration in making your decision whether to enroll or not, and if you do, how much you should contribute.

ASI administers the Health Care Flexible Spending Account (HCFSA) and Dependent Care Flexible Spending Account (DCFSA). For more details on qualified expenses and how these accounts work, please refer to the ASI website.

 

Premium Only Plan (POP)

  • Once you elect to participate in the POP, your enrollment will continue from plan year to plan year. Changes to your POP election may be made only during open enrollment.
  • The POP allows your monthly medical, dental and vision insurance premiums to be deducted from your paycheck before taxes are calculated.
  • HR requires proper documentation for SGDPs and their dependents in order to deduct the relevant portions of their premium pre-tax.
  • If you have children or relatives who do not qualify as federal tax dependents, their premiums are not eligible for the POP and you may incur imputed income.


Health Care Flexible Spending Account (HCFSA)

  • The HCFSA allows you to cover certain eligible out-of-pocket medical, dental and vision expenses not covered or reimbursed by insurance and incurred by you or your federal tax dependents.
  • You may contribute pre-tax, a minimum of $10 per month up to $3,200 (for 2024) per plan year. Your payroll deduction will be calculated as your annual election divided by the number of remaining pay periods in the plan year (July-June).
  • Enrollment in a medical and/or dental plan is not required for you and/or your federal tax dependents to participate in the HCFSA.
  • You cannot make contributions to both an HCFSA and a Health Savings Account (HSA). You may not use this account to reimburse insurance premiums.
  • Expenses qualify for the HCFSA when they are incurred, not when they are paid.
  • You must re-elect the HCFSA every plan year to continue participation.
  • Please refer to the ASI website to verify eligible expenses.
  • Effective date is the 1st day of the month following the date Employee Services receives your form.
  • Your final contribution will be June 30.
  • You will be allowed to incur expenses through Sept. 15.
  • You must file claims for reimbursement by Nov. 15.
  • It is very important to carefully plan your election amount as any contributions left in the account will be forfeited.

Consider the effects cafeteria plans may have on your taxes:

  • Cafeteria plan dollars are deducted from your pay pre-tax, meaning before federal, state, FICA (Social Security), and Medicare taxes are paid. Your taxable income is reduced by the amount you contribute.
  • Participating in cafeteria plans reduces the salary on which annual contributions to Social Security are calculated, which may result in a reduction of the Social Security benefits received at retirement.
  • You may want to carefully consider whether to participate in cafeteria plans during your HSA years (typically your last years of employment)

 

Dependent Care Flexible Spending Account (DCFSA)

  • This account allows you to pay for the cost of caring for your federal tax dependents so you (and your spouse if you are married) can work. This is NOT for your dependent spouse's or children's healthcare expenses.
  • You may contribute pre-tax, a minimum of $10 per month and up to $5,000 ($2,500 if you are married and file your taxes separately). Your payroll deduction will be calculated as your annual election divided by the number of remaining pay periods in the plan year (July-June).
  • Your contribution is for the plan year. However, for tax purposes you are responsible for keeping track of your total calendar year contributions, including any contributions made by your spouse.
  • Federal tax dependents, for the purpose of the DCFSA, include any qualifying child or relative who is under the age of 13, your spouse, and older dependents who are mentally or physically incapable of self-care and who live in your home at least eight hours each day. If you are divorced, the dependent must be your son or daughter for whom you have more than 50 percent physical custody.
  • Qualifying providers can provide care in your home or outside your home. Care provided outside your home and in a facility caring for more than five individuals must be licensed by the state.
  • Expenses may not be paid to your spouse, to any of your children who are under the age of 19 at the end of the year in which the expenses are incurred, or to any other individuals for whom you or your spouse are entitled to a personal tax exemption as a dependent.
  • Dependent daycare expenses are incurred when the day care is provided. You must receive the dependent daycare services before you file a claim for those services. 
  • You must re-enroll each year during open enrollment.   
  • You must re-elect the DCFSA every plan year to continue participation.
  • Please refer to the ASI website to verify eligible expenses.
  • Effective date is the 1st day of the month following the date Employee Services receives your form. Your final contribution will be June 30.
  • You will be allowed to incur expenses through Sept. 15.You must file claims for reimbursement by Nov. 15.
  • It is very important to carefully plan your election amount as any contributions left in the account will be forfeited.

Consider the effects cafeteria plans may have on your taxes:

  • Cafeteria plan dollars are deducted from your pay pre-tax, meaning before federal, state, FICA (Social Security), and Medicare taxes are paid.
  • Your taxable income is reduced by the amount you contribute.
  • Participating in cafeteria plans reduces the salary on which annual contributions to Social Security are calculated, which may result in a reduction of the Social Security benefits received at retirement.
  • Reimbursements from your DCFSA may reduce or eliminate dependent care tax credits on your federal income tax return. For most people, DCFSA reimbursements provide a greater benefit, but everyone's tax situation is different, so it is best to compare tax savings on an individual basis.
  • You may want to carefully consider whether to participate in cafeteria plans during your HAS years (typically your last years of employment).

 

What is an HSA?

An HSA is like an IRA for your health care that helps you to prepare for and manage health care costs. HSAs offer three tax benefits: tax-free saving, growth and spending on qualified medical expenses anytime, from today throughout your retirement—something you can't get from other retirement accounts.

HSAs complement your retirement plan, helping you prepare for the estimated $250,000 or more that most people will need for retirement medical expenses. HSAs can also be used to save and pay tax-free today for your health care expenses—from doctors' visits to prescriptions, as well as dental and vision expenses.

You can pair an HSA with CU Health Plan – High Deductible.

2024 HSA contribution limits

The maximum amount the IRS allows you to contribute to your HSA in 2024 is $4,150 for individual coverage and $8,300 for family coverage. If you are age 55 or older, you can contribute an additional catch-up contribution of $1,000.

When you start a Optum HSA through CU Medicine, you can set up pretax HSA contributions from your paycheck. You can make contributions to your HSA up to the annual IRS contribution limits on an after-tax basis and deduct them from your return.

HSA funds are your to keep even if you don't use them and they carry forward year after year. 

What this plan covers

Your HSA offers tax-free contributions and spending on qualified medical expenses even in retirement.  Expenses include doctor's visits and prescriptions, as well as dental and vision expenses.

See what health care expenses qualify.

Taxes

You won't be taxed, even after you retire, as long as you use the money in your HSA for qualified medical expenses for you, your spouse and tax dependents. 

These tax savings can allow you to save up to $25 or more for every $100 contributed to your HSA.