Section 125 of the IRS Code allows organizations to establish flexible spending accounts (FSAs) where employees can pay on a pre-tax basis for qualifying job related dependent care and uncovered medical expenses (e.g., co-pays, deductibles, etc.). A full 125 Cafeteria Plan requires not only plan documents and a summary plan description, but must be administered allowing only qualified expenses to be reimbursed. Most organizations use a third party administrator.
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link : http://erisasolutions.com/full-125_cafeteria_plan.html
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