What is a Section 125 Cafeteria Plan Flexible Spending Account?
The
plan is governed by the Internal Revenue code which allows you to pay
for qualified benefits with pre-tax dollars.
How much can I allocate?
The IRS limits dependent care contributions to $5000 per tax year (joint return). The medical reimbursement plan limit is set by employer up to the IRS maximum of
$2750 (effective 2020).
Can my medical and dependent care expenses be combined?
No. The IRS requires separate accounts be funded for each.
How do I know if an expense is eligible?
Eligible expenses are listed in the IRS Publication 502, or a partial list may be viewed on our website.
How do I keep track of my balance?
You can set up online access by logging on to www.cpa125.com.
How long does the plan last?
Your employer determines the plan year which typically runs twelve months. The employee has to enroll each plan year.
What if I want to make a change during the year or I terminate employment?
This amount may be increased or decreased annually only during open enrollment.
The IRS allows some changes to be made in the event of a ‘change in status’ qualifying event such as birth, death, marriage, divorce or a change to you or your spouse’s employment.
If you terminate, your participation in the plan ceases on your termination date.
Will I get money back if it is not used?
No, the IRS does not allow unused funds to be returned. It is important to calculate your expenses precisely so not to forfeit any dollars.
How will I get reimbursed for expenses?
If your plan offers a prepaid debit card, you will receive two cards in the mail upon enrollment. Once you activate the card, just present the card when paying for the services performed or expenses incurred.
If your plan does not include a prepaid debit card or you were unable to use the card, simply submit a manual claim form with itemized receipts after the services/expense was incurred. You can submit claims as frequently as you like, but no later than after the grace period deadline date after your plan year ends (typically 90 days).
Dependent care accounts must have funds available before payment can be made.
We process electronic ACH direct deposits weekly, otherwise checks are mailed every other week. Employees are encouraged to sign up for direct deposit!
