The Flexible Benefits Program is a fringe benefit plan specifically authorized by Section 125 of the Internal Revenue Code. It is a way of providing employees with valuable benefits where both the organization and its employees can reduce their tax liability.
Debit cards do more than help consumers manage food and gas bills they also make it easier for employees to pay for pre-tax flexible spending account (FSA) expenses. Here’s how it works: The card has direct access to FSA funds, paying only for eligible expenses wherever MasterCard or Visa is accepted. When the card is swiped, payment is made from an employer’s “advance account,” while the employee’s coverage amount is debited from an FSA to reflect payment of an approved expense.
The card can be used to pay for unreimbursed expenses under Section 125 cafeteria plans, dependent care accounts, Section 132 transit plans, Section 105 defined benefit accounts and qualified tuition reimbursement accounts. The beauty of a flex debit card is that money is automatically deducted every pay period to finance medical expenses, and plan participants won’t miss dollars that they don’t even see. Employees appreciate the convenience of deferring tax-free dollars over 24 or 26 pay cycles and swiping a debit card rather than writing a check or paying cash.
It’s paramount for people to be more cognizant of the ability of an FSA to help them offset rising health care costs and to use revolutionary technology as well.
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Always consult with your tax or legal advisor with any questions about tax or legal matters. You may also visit the IRS website at www.irs.gov for further information.