Cafeteria Plans- A few questions

busydev

Mon, Jun 25 2012, 1:56 pm

Im not sure if this should be under this section of finances, but I suppose either would work.

From what I see a cafeteria plan is that certain things such as insurance costs are deducted pre tax from paychecks.

For instance if I have to pay $150 per month for my insurance policy then it can be taken off of my paycheck before taxes are taken off. This (obviously) saves me money.

NOW does anyone know if that would work for my SPOUSE'S insurance?

I am right now still on my parents insurance since I am not yet 26 (thanks to obamacare). Until July 1 we were all on Medicaid as well. We had to pay a small monthly premium, but we were eligible.

as of July 1 they are changing the income eligibility for family care. (not sure that this is in all states- so everyone else does not have to get nervous) Basically my husband and I no longer qualify. my baby does.

But since I still have insurance I do not need another insurance... but my husband does. he is in kollel. I am working. My job does not offer insurance. But I will have an insurance expense. Is there a way that we can have it taken off pre tax from my paycheck??

the only "on the books" paycheck that my husband gets is a work study paycheck for abt $150-200 a month (varies). but there is no taxes taken off even tho we do get a w2 at the end of the year.

any ideas?? or do we have to pay for his insurance out of post tax pocket?

thanks!!

busydev

Mon, Jun 25 2012, 2:07 pm

I am the bookkeeper at work

we outsource payroll and I called the company but I dont think she understood me 100% (english is not her first language) cause she was saying well of course the spouse is covered since the employee is on the plan and when I tried to say that the employee isnt on the plan just the spouse she was like of course employee is. but first she claimed not to be an expert in cafeteria plans.

I tried googling but nothing I found yet tells me either way. so im turning to my next source of info Smile

Frazzled Mommy

Mon, Jun 25 2012, 3:59 pm

This may be helpful to you

1. Are you able to purchase coverage for your husband as part of your company's group plan? Most companies allow the employee to add their spouse and or children (you may need to reimburse them for the full cost) If your husband were covered under your company's plan, then all the premiums you are paying would be tax free (on a FICA and Federal level only- most states still do tax these contributions

2. If your husband cannot join your policy, and you purchase a separate plan for him, you could count the premiums as part of your medical expenses on your tax return IF YOU ITEMIZE DEDUCTIONS. You would also be allowed to count this as part of your medical expenses on many state returns.

If you need more info, you can PM me.

Frazzled Mommy

Mon, Jun 25 2012, 3:59 pm

busydev

Mon, Jun 25 2012, 4:08 pm

Frazzled Mommy wrote:

My company doesnt have an insurance plan. So cafeteria plans only work for company offered insurance not for individually bought insurance? It didnt seem that way from some google results I came up with.

Tova

Mon, Jun 25 2012, 7:12 pm

busydev - that's my understanding. That cafeteria plan costs (ie - dependent care, health insurance, etc.) that get deducted pre-taxed are only for group corporate plans offered through your workplace. Someone correct me if I'm wrong but I'm pretty sure that's the case.

lamplighter

Mon, Jun 25 2012, 7:31 pm

I think Tova is right. It is referring to insurance offered by your company, not private insurance.
If it is company insurance then you should be able to put DH on as well, if it's private insurance then neither of you can use pre-tax dollars for it.

Orchid

Mon, Jun 25 2012, 8:59 pm

STovah wrote:

I believe you are not allowed to use your health care FSA to cover health insurance premiums.

I don't think OP was referring to FSA contributions, rather, straight up insurance premiums.

Agree with previous posters - you can't add your husband to your insurance expense unless it is through your employer's insurance.

Which raises the issue - how are you able to deduct your insurance expense from your parents' insurance from your company payroll?????

ETA: meaning - I don't get the mechanics of what you're doing already. Let's say your monthly pay is $1,000 (gross). Tax withheld comes off, as well as insurance premiums -that you claim is run through payroll -(that you get through your parents) of say $300 a month. So your company writes a check to the parents' insurance company, as they would for all your other deductions and withholdings?

busydev

Tue, Jun 26 2012, 11:15 am

I dont deduct anything from my paycheck for my parents.

Facts are:
1. I have insurance under my parents policy (through my father's employer) until I am 26. I do not pay anything for it. They do not pay any more to have me on the family plan.

2. My baby is on medicaid.

3. My dh and myself are currently on medicaid. (for me it is secondary insurance). However due to changes in the eligibility income levels as of July 1, 2012 neither of us are covered.

4. We are going to be buying an individual plan for dh.

5. We were wondering if there was a way for premiums etc to be pre tax.

6. My employer does not offer an insurance policy. However there are employees who have money deducted pre tax to cover their personal insurance premiums and other medical expenses via a "cafeteria plan".

from my research it seems that you can take off personal expenses via a flex spending cafeteria plan or something along those lines. The employee figures out how much money they think it will cost them over the year and that amount is pretax. (this is what my company does with some employees.) If the employee is on the insurance then it seems there is no problem even if its a family plan and covers other people.

But the fact that I wouldnt be on the plan changes it, or so it seems.

Thanks everyone for the info.

busydev

Tue, Jun 26 2012, 11:28 am

this is what I found online

Flexible Spending Account (FSA)

In an FSA, employees may set aside on a pre-tax basis a pre-established amount of money per plan year. The employee can use the funds in the FSA to pay for eligible medical, dependent care, or transportation expenses.

this is what employees in my company do.

Would this work if I (the employee) am not on the insurance.

mommyhood

Tue, Jun 26 2012, 12:18 pm

busydev wrote:

I think the limit for an FSA is 2,500 a year and I'm assuming the insurance costs more than that.

busydev

Tue, Jun 26 2012, 3:41 pm

Frazzled Mommy wrote:

The FSA rules specifically disallow insurance premiums. You can use it for co-pays and other medical expenses, but not for insurance premiums. You can look it up on the IRS's site just to be sure.

oh ok... I was wondering that after I continued reading and didnt see any examples for paying premiums...

now my question is whats the deal with the people that work for my company who are taking off a large amount a month...

it was set up before I started here... and my boss said that from what he understands (not claiming that he understands tho) they are paying premiums with it.... weird...

Orchid

Tue, Jun 26 2012, 4:46 pm

busydev wrote:

Also when (if) I figure out my FSA amount, I can include any allowed expenses over my whole family.

(my own co pays as well as dh's and technically ds's plus any other out of pocket medical expenses)

is this correct?

Ok - I had misunderstood you.

You can make contributions to your FSA plan and then reimburse yourself for your entire family's medical expenses, including insurance premiums. For the full list of qualified medical expenses, see IRS pub 502 http://www.irs.gov/pub/irs-pdf/p502.pdf page 5 (premiums are a qualified expense as per page 8).

The caveat w/ FSA plans is they work on a "use it or lose it" scheme (unlike an HSA plan, which rolls over from year to year indefinitely), so be conservative with the amount you contribute to the FSA plan.

busydev

Tue, Jun 26 2012, 5:02 pm

Orchid wrote:

Ok. so you gave me an official document (from 2011) but its for filing taxes. Are you 100% positive that a FSA allows it? (since frazzeled mommy said they disallow it)

just want to be 100% clear

and thanks so much!!

Orchid

Tue, Jun 26 2012, 8:08 pm

busydev wrote:

Orchid wrote:

Publication 502 is not a tax document, it's like a booklet of IRS instructions. The IRS didn't produce one for 2012 so the 2011 booklet is the latest. You can take my advice or leave it (and I assure you I'm not insulted the slightest if you leave it Very Happy

) but it's written in plain English that you can use FSA funds for insurance premiums. If frazzled mommy has anything to add, speak up frazzled!