Cafeteria plan / Section 125
A gentle reminder that November marks the month that most companies start the sign ups for their 2010 cafeteria or section 125 plans. If you are diabetic (or most any other disease) signing up can produce real savings. Here is how it works. Suppose for instance you are in the 15% federal tax bracket and you estimate that you will have $1,000 of medical expenses in 2010. By setting that $1,000 inot a section 125 account, you will save $150.00. This is how it works.
The amount you set aside is diverted into an account that only you can draw on. This is done pretax, so you will not pay federal and in many states state tax on the amount you set aside. This means you save. at the very least, the amount of the federal taxes you would have paid on the amount set aside.
Once you set these funds aside, you may draw on them immediately. If for instance you have an early bill like many of us do, for prescriptions, you can get immediate reimbursement even if the full amount has not yet been withdrawn.
You may seek reimbursement for almost any treatment which requires a doctor or medical providers intervention. For instance dentistry claims are eligible, so are eye exams and glasses, doctors visits, prescriptions, medical devices, in short the cost of almost any medical procedure, visit or prescription that is ordered by a physician.
In addition two years the IRS added certain non prescription items to the those eligible for reimbursement. For a full list ask for a eligible items at the time of sign up.
No so you know, this is a use or lose benefit. So if you set aside $1,000 and you claim only $900 then you lose the $100 not claimed. However, you may all claim the expenses of all dependents and co wage earners. So, lets say you sign up for a $1,000 deduction, you may claim the medical expenses of your spouse, and children to full fill this $1,000. This amount is available for all medical expesnes incurred in your plan year. Generally January 1, 2010 to December 31, 2010.
One other thing, deductions will be throughout the plan year. So you pay gradually, but the full amount is available for your reimbursement for expenses incurred starting the first day of the plan year.
Some practical tips:
If you need glasses, or the kids need braces, you might consider putting off the procedure until the start of the plan year. Remember eligible expenses are for procedures undertaken int he plan year. So if you have braces put on on December 30, but the bill arrives on January 2, the payment on January 2 is not eligible for reimbursement. Dentists, eye doctors, and most medical providers are well aware of the requirements for section 125 reimbursement and will assist with the plan rules.
If for instance you have a large initial payment for drugs that occurs in the beginning of the year. you should likely go ahead and file for reimbursement even if the amount has not been fully withdrawn.
I suggest if this is your first year you start slow. Withhold a few dollars, try it out and get used to the plan rules, before you fully invest in it. You will have the opportunity to change your withholding again at about this time next year.
rick phillips
The amount you set aside is diverted into an account that only you can draw on. This is done pretax, so you will not pay federal and in many states state tax on the amount you set aside. This means you save. at the very least, the amount of the federal taxes you would have paid on the amount set aside.
Once you set these funds aside, you may draw on them immediately. If for instance you have an early bill like many of us do, for prescriptions, you can get immediate reimbursement even if the full amount has not yet been withdrawn.
You may seek reimbursement for almost any treatment which requires a doctor or medical providers intervention. For instance dentistry claims are eligible, so are eye exams and glasses, doctors visits, prescriptions, medical devices, in short the cost of almost any medical procedure, visit or prescription that is ordered by a physician.
In addition two years the IRS added certain non prescription items to the those eligible for reimbursement. For a full list ask for a eligible items at the time of sign up.
No so you know, this is a use or lose benefit. So if you set aside $1,000 and you claim only $900 then you lose the $100 not claimed. However, you may all claim the expenses of all dependents and co wage earners. So, lets say you sign up for a $1,000 deduction, you may claim the medical expenses of your spouse, and children to full fill this $1,000. This amount is available for all medical expesnes incurred in your plan year. Generally January 1, 2010 to December 31, 2010.
One other thing, deductions will be throughout the plan year. So you pay gradually, but the full amount is available for your reimbursement for expenses incurred starting the first day of the plan year.
Some practical tips:
If you need glasses, or the kids need braces, you might consider putting off the procedure until the start of the plan year. Remember eligible expenses are for procedures undertaken int he plan year. So if you have braces put on on December 30, but the bill arrives on January 2, the payment on January 2 is not eligible for reimbursement. Dentists, eye doctors, and most medical providers are well aware of the requirements for section 125 reimbursement and will assist with the plan rules.
If for instance you have a large initial payment for drugs that occurs in the beginning of the year. you should likely go ahead and file for reimbursement even if the amount has not been fully withdrawn.
I suggest if this is your first year you start slow. Withhold a few dollars, try it out and get used to the plan rules, before you fully invest in it. You will have the opportunity to change your withholding again at about this time next year.
rick phillips
Replies to This Discussion
-
Permalink Reply by rick phillips on -
I oversaw employer health insurance plans for several years. I currently don't work. However, I am available as a private insurance, school business, and local government consultant. Or maybe not.
rick phillips
-
Permalink Reply by Kathy on
-
That's a great explanation Rick. I've used the plan ever since it was available and always use up the $ by the end of summer.
So for 2010 I calculated very carefully and with 4 doc visits, maybe one urgent care visit and all my prescriptions I will copay a minimum of $2200. Ugh.
One of my co-workers husbands has MS and they have a lot of bills also. I was shocked to hear that she hadn't signed up for it because it was "too much paperwork". Well, there is almost no paperwork involved for us. Our medical provider, and mailorder pharmacy are all linked in with the plan, so anything we pay is automatically submitted for reimbursement. People are so goofy. (However, the first year we had it, I guess we did have to submit receipts, but that was no big deal as long as you were organized).
Hopefully this discussion will encourage people to use it.
ANd, as you said, there are a ton of things that can be claimed - I know a lot of people who get glasses at the end of the year to use up any that remains. I was also able to claim reimbursement for my home blood pressure monitor and acupuncture.
-
Permalink Reply by sweetpotater on -
So – this has to be through a work-sponsored healthcare plan?
I just got laid off so I'm doing COBRA as of this week. No cafeteria plan that I know of. We did also have an HSA payroll deduction through my former employer's high-deductible BCBS plan. From what I understand I can still contribute pre-tax dollars to my HSA, up to the maximum yearly contribution, even though my only income right now is from unemployment. But I could avoid the federal taxes on the unemployment income by putting it in the HSA, couldn't I (California still taxes HSA contributions, booo)? And I can use HSA funds to pay COBRA too, right?
I know this has nothing to do with your post, but you seem to know what you're talking about so figured I'd put it out there! Thanks for any info ... anyone?
-
Permalink Reply by rick phillips on
-
I will have to confess a bit of ignorance about HSA's. However this is an impression, and only an impression, that in order to contribute you must be employed. I suggest calling your HSA provider, because if you can contribute, then I beleive what you suggest is correct. However, I while I do have an HSA, I have never independently contributed or withdrawn form it.
rick phillips
-
Permalink Reply by sweetpotater on
-
Thanks for the feedback – I'll look into it.
I'm thinking maybe your impression is because you have to have coverage under an HSA-qualified high deductible health plan in order to contribute to the HSA. I'm not employed anymore, but through COBRA I'm still enrolled in the same plan I had before I got laid off. So I'm hoping I'll still be able to contribute – COBRA is not cheap and it would be nice to be able to pay the premiums with pre-tax money.
I'll give the plan admin a call and report back!
-
Permalink Reply by Kelly Rawlings on -
Thanks for the timely reminder, Rick!
Living with diabetes, there's always some supply or prescription that can be stocked up in order to use any excess that you notice in the account near the end of the plan year.
When I vowed to treat lows only with glucose tabs (to avoid overtreating), I realized I could expense that over-the-counter cost to my flexible spending account. I stocked up on my favorite flavors!
-
Permalink Reply by MelissaBL on -
Oooooh, I hadn't thought of using my FSA for glucose tabs. I need to make that happen. We blew through our FSA in just a couple of months after enrollment; for this next year, we've put in the max amount.
-
Permalink Reply by Kelly Rawlings on
-
I don't usually use them, but I also bought alcohol wipes for on-the-road use, expensed my daily low-dose aspirin and vitamin D, purchased unexpired ketone strips, etc.
Not sure all plans allow OTC expenses, but worth looking into!
-
Permalink Reply by Terry O'Rourke on -
Rick,
Good post. Is this "Section 125, Cafeteria Plan" that you write about also know as a "Flexible Spending Account" (FSA)? I suspect that it is.
It sounds like a benefit that I have used for many years. Money placed into the FSA avoids federal, state, FICA, and California Sate Disability taxes. I estimate that for every $100 I put in the FSA saves me about $40. Put another way, during 2009 I was able to buy $3,000 worth of medical care and supplies for $1,800.
The rules for my FSA have improved markedly over the years. My medical, dental, and mail-order pharmacy co-pays and deductibles are automatically submitted to the FSA administrator in a feature called "automatic crossover." I receive reimbursement directly to my personal checking account. Because the automatic crossover feature is done electronically, I often receive FSA reimbursement before I receive the Explanation of Benefits statement from the insurance company.
In the past eligible expenses had to be incurred during the January 1 to December 31 plan year but claims could be submitted until April of the following year. For 2010, the eligible expense period expanded to include the first three months of 2011.
Under plan rules, one may also submit expenses for a wide range of over-the-counter medicines. Glucose tablets, for example, are an eligible expense. In fact if you look closely at a Walgreens' receipt, all eligible items are marked with an FSA notation.
This is a great program. Anybody who is eligible should seriously consider participating.
-
Permalink Reply by Terry O'Rourke on
-
Correction to above: For 2010, the eligible expense period in my plan extends to March 15, 2011. Under the plan this is known as the "grace period." The addition of the grace period helps participants to avoid forfeiting any money under the "use it or lose it" provision in this plan.
The inclusion of a grace period and the length of the grace period, if any, varies from plan to plan.
-
-
Here is a list of items that are covered: http://www.irs.gov/publications/p502/index.html (Note that they are the same items that can be claimed as medical expense deductions).
Scrolll down to the "items not covered" section and see that dancing lessons and controlled substances do not qualify ....boo hoo.
Spread the word
Follow Us
Our Other Programs
 |
 |
 |
 |
 |
Most Popular Pages
- Topics and Videos
- Blood glucose meters
- Average Diabetic Readings
- A1C Readings
- Grams of Carbs per Meal
- Which CGM is more accurate
- Omnipod Review
- Animas Ping or Cozmore
- Famous people with diabetes
- Sugar Free Cheesecake
- iPhone Diabetes Applications
- Online Blood Glucose Tracking tools
- 62 Years Of Type 1 Diabetes
- Diabetes Categories
- Recipes for Diabetics
- Type 2 Diabetes Forum
- Type 1 Diabetes Forum
- Insulin Pumpers Forum
- LADA: Type 1.5 Diabetes Forum
- Diabetes Groups
- Insulin Pumpers Group
- Continuous Glucose Monitor - CGM Users
- Dexcom Continuous Glucose Monitor Users
- Byetta Users Forum
- Raw Food Diabetics
- Deltec Cozmo Insulin Pump Users
- Animas Insulin Pump Users
- Symlin Users Forum
TuDiabetes Team
 Manny Hernandez |
 Andreina Davila |
 MelissaBL |
 Kristin |
 Scott |
 Teena Swager |
Welcome Committee
Content Committee
DHF Ambassadors
© 2009 Created by Diabetes Hands Foundation, P.O. Box 9421, Berkeley, CA 94709.
Diabetes Hands Foundation (DHF) is a 501(c)(3) nonprofit. Donations to DHF are eligible to be deducted.
Disclaimer
The contents of TuDiabetes is for informational purposes only and is not intended to be a substitute for professional medical advice, diagnosis, or treatment. Always seek the advice of your physician or other qualified health provider with any questions you may have regarding a medical condition, including without limitation diabetes. Never disregard professional medical advice or delay in seeking it because of something you have read on TuDiabetes.
If you think you may have a medical emergency, call your doctor or 911 immediately. The Diabetes Hands Foundation does not endorse any specific tests, physicians, products, services, procedures, opinions, or other information that are advertised or mentioned on the web site.
TuDiabetes®, TuDiabetes.org®, Word in Your Hand™, Drawing Diabetes™, Diabetes Supplies Art™ and No-Sugar Added Poetry™ are trademarks or registered trademarks of the Diabetes Hands Foundation.
