Dependent Care FSA / Unreimbursed Medical FSA

Under Section 125 of the Internal Revenue Code the Federal government has afforded an excellent tool for employees to minimize their benefit costs.  There are three major benefits you can consider with regard to Section 125:

  • Premium Only Plan (POP) – A POP plan allows employees to deduct from their paycheck on a pre-tax basis the cost of certain insurance products – typically group health, dental and vision insurance.
  • Unreimbursed medical flexible spending account (FSA) – With an unreimbursed medical FSA can pay for certain health care expenses with pre-tax dollars.  
  • Dependent care flexible spending account (FSA) – The cost of daycare for children and the elderly is expensive.  A dependent care FSA allows the employee to pay for these costs with pre-tax money.


The Internal Revenue Service requires certain non-discrimination tests be satisfied for an employer to offer a Section 125 plan.  One of the fundamental tests is that “key” employees cannot account for more than 25% of total pre-tax deferrals. 

In 2015 a “key employee” is defined as one who at any time during the prior plan year was: 

  • An officer with gross annual compensation over $170,000, or
  • An owner of at least 5% of the company, or 
  • An owner of at least 1% of the company with gross annual compensation over $150,000.

An Atlanta employee benefits consultant from our insurance agency can help you design a Section 125 pre-tax plan that meets the needs of you and your staff.  

Contact us now.

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