• Section 125 is a tremendous opportunity for you to enhance your benefits package.  Your employer knows that this is a highly beneficial program and wants you to have the opportunity to participate.

• By participating in the plan, you can save money by using pre-tax dollars to pay for medical premiums, unreimbursed medical/dental expenses and dependent day care.

• When you use pre-tax dollars, you will reduce your taxable income and have fewer taxes taken out of your paycheck. Under a Section 125 plan, you can actually have more spendable income

• Your employer wants you to fully understand the advantages of the plan. The following represents the most often asked questions about Section 125. This information will help you to better understand how to make the most of your pay check.

1. WHAT IS SECTION 125?

Section 125 is part of the Internal Revenue Code that allows employees to convert a taxable cash benefit (salary) into non-taxable benefits. Under a Section 125 plan, you may choose to pay your medical premiums, unreimbursed medical expenses and dependent child care before any taxes are deducted from your paycheck.

2. IS SECTION 125 LEGAL?

Yes. Even though Section 125 may sound "too good to be true," the program is legal and beneficial. The United States Congress created Code Section 125 in an effort to make benefit programs affordable for employees. Code Section 125 was established in the Revenue Act of 1978.

3. HOW CAN SECTION 125 WORK FOR ME?

Your employer's plan (authorized by Section 125) can make your benefit plan more affordable. You can pay your medical premiums, unreimbursed medical expenses, and dependent day care with pre-tax dollars. By paying these expenses before you pay taxes, you lower your taxable income, which results in more take home pay.

4. WHAT ARE PRE-TAX DOLLARS?

Pre-Tax dollars are dollars you pay for qualifying expenses under your employer's Section 125 plan. These dollars are deducted from your gross earnings - before taxes are taken out.

5. WHAT BENEFITS CAN I PAY FOR WITH PRE-TAX DOLLARS?

Section 125 allows certain benefits to be deducted on a pre-tax basis. Specifically, medical premiums, unreimbursed medical expenses, and dependent day care.

6. HOW WILL THIS AFFECT MY PAYCHECK?

Salary Illustration

The following illustration is an example of how the plan can help you make the most of your paycheck. Your individual results may vary subject to your income and tax situation.

	Before the plan	After the plan
Gross Pay	$2000	$2000
Pre-Tax Dollars	-0-	150
Federal/State/SS (estimated 20%)	400	370
Qualified Expenses	150	-0-
Spendable Income	$1450	$1480
Tax Savings of $30.00

7. HOW DO I PARTICIPATE?

Speak with your Human Resources Department for instructions on how to enroll on-line for your employer's Section 125 plan.

8. DO I HAVE TO PARTICIPATE?

No. You are under no obligation to participate in this plan. However, you should speak with your Human Resource Department to see what forms you are required to complete to waive participation.

9. CAN I ENROLL IN A SECTION 125 PLAN WHENEVER I WANT TO?

Your employer's Section 125 plan is an annual plan. You must enroll/waive participation in the plan during the specified enrollment period.

10. CAN I CHANGE MY ELECTIONS IN THE SECTION 125 PLAN AT ANY TIME DURING THE PLAN YEAR?

No. You cannot change your elections during the plan year, except for certain specified changes in family status. Those changes include marriage, divorce, death of a spouse, death of a child, birth or adoption of a child, or termination of a spouse's employment. You must inform your employer within 30 days of the status change.

11. ARE THERE ANY RISKS IN PARTICIPATING IN THE PLAN?

You must be conservative when utilizing unreimbursed medical or dependent day care expenses in the plan. Any money not used by the end of the plan year will be forfeited.

12. WHO IS OFFERING ME THIS PLAN?

Your employer is offering the plan and has endorsed it to provide you with an enhanced employee benefit package.

The Plan is a positive step toward making your benefits package more affordable. Your employer offers this plan and recommends that you take advantage of this opportunity to make the most of your paycheck.

Cycle of Reimbursement

The following steps shows how the flexible dollars are handled from deposit to payment.

1. Submit Enrollment Form
2. Employer deposits money into Reimbursement Account (payroll salary reduction).
3. Employee incurs an eligible expense
4. Employee submits the claim
5. Administrator processes the claim
6. Benefits check (pre-tax money) is sent to employee.
7. Employee receives periodic statement.