CNIC's Service Pages

Section 125 Flexible Spending

Flexible Spending Arrangements (FSA), also known as Flexible Benefit Accounts (FBA), Section 125 Plans, or simply FLEX, are one of the most dramatic developments in recent years in employee benefit plan design.

CNIC offers FLEX claim processing and check issuance. We also assist with the generation of information required each year by the IRS and Department of Labor, and maintenance of spending account records for reports to participating employees.

The following are frequently asked questions regarding FLEX plans and how they may benefit your employee benefit plan:

What is "FLEX"?

With FLEX, an employer arranges for the establishment of individual accounts of pre-tax dollars. Employees decide on the amount of money to be budgeted for each benefit option pre-selected by the employer. Employees then utilize this account throughout the year, as needed, to cover a variety of eligible expenses not covered by benefit plans such as:

• Medical Expenses
• Group Life and Health Premiums
• Dependent Care Assistanc

What is Section 125?

FLEX is provided for under Section 125 of the Revenue Code. In addition to Section 125, Sections 79, 106, 129, and 213 provide authorization for reimbursement of certain benefits by a FLEX plan.

What are the advantages for an employer?

Without the investment of new funds, an employer is able to serve a number of objectives including:

• Reduce F.I.C.A. tax contributions
  
• Improve employee morale by offering greater benefit choice, and by utilizing pre-tax financing of allowable expenses
  
• Increase employee health care cost awareness
• Enhance recruiting by offering progressive benefits

What are the employee tax advantages?

In the absence of FLEX, employees must pay out-of-pocket portions of employer-sponsored health, life, long-term disability, and accidental death and dismemberment plan premiums, as well as health expenses not covered by the employer's health benefit plan with after-tax dollars. Dependent care expenses are paid on the same basis.

With FLEX most of these expenses can be paid with pre-tax dollars, yielding substantial income and F.I.C.A. tax savings for many employees. That means increased spendable income… a nice compliment to the increased freedom of benefit choice they have also gained.

Who qualifies?

Businesses with non-owner employees qualify. Governmental and most private not-for-profit organizations can also have a FLEX plan. All employees, other than sole proprietors and most partners in partnerships, may participate.