There are two types of Section 125 Plans:
Premium Only Plan (POP) – With this plan, your employees pay their portion of insurance premiums on a pretax basis rather than an aftertax basis.
Flexible Spending Account (FSA) – This plan allows your employees to set aside pretax money to pay for expenses not covered by health insurance, such as vision exams, eyeglasses and contact lenses, vitamins, co-payments, etc. The employee pays out-of-pocket and then files a claim for reimbursement.
Section 125 plans have limitations on participation as well as use. It’s important that business owners and employees understand the “use it or lose it” aspect of flexible accounts as well as eligibility requirements.
