Tax Minute: Section 125 Plan

Tax Minute: Section 125 Plan

What is a Section 125 Plan?
A Section 125 plan allows employees to purchase insurance with PRE-TAX dollars.

WHAT BENEFITS ARE OFFERED UNDER CHAMPION’S SECTION 125 PLAN?

  • Medical Insurance
  • Dental Insurance
  • Vision Insurance
  • Dependent Care FSAs (internal company account)
  • Health Saving Account (HSA), if you are on the High Deductible Medical Plan
  • AFLAC Cancer Insurance
  • AFLAC Intensive Care Insurance
  • AFLAC Accident Insurance
  • AFLAC Hospital Indemnity Insurance (HIP)

CHAMPION OFFERS A FULL CAFETERIA PLAN
Under the Full Cafeteria Plan, Champion makes a non-elective contribution for every eligible employee ($150/month for single individuals; $300/month for individuals with a spouse or child). Each employee may spend the Champion contribution to purchase any of the benefits offered within the Cafeteria Plan. In addition, the employee may contribute PRE-TAX dollars to purchase additional benefits beyond what he or she can purchase with Champion’s contribution. Champion does not currently offer a Cash Benefit of the non-elective contributions to the Cafeteria Plan.

Under the Full Cafeteria Plan, Champion offers two options for medical insurance: High Deductible and Low Deductible. Individuals who choose the High Deductible will receive a Health Savings Account (HSA) which will retain funds even if they are not used.

WHAT DOES THIS MEAN FOR YOU?
More money in your pocket!

For example, an employee with a spouse and child making $20/hr who chooses to retain enrollment in Champion’s Full Cafeteria Plan will see their taxable income reduced while their spendable income increases. In this case, the employee would take home an ADDITIONAL $3,260 a year! (See chart at bottom.)

HOW DO YOU ENROLL?
Elections must be made before the first day of the plan year or eligibility date. While participants who utilize pre-tax deductions in the Section 125 Plan are not able to make a change to elections or cancel benefits until the beginning of the next plan year, they may enroll when a qualifying event, such as getting married or having a child, occurs.

For more information on Champion’s Full Cafeteria Plan, please contact Laurie Firmin in Human Resources.