Why establish a Section 125 Cafeteria plan vs. Section 105 or Health Savings Account 125 plan?
Although each has their respective benefits depending on the tax situation, the Section 125 Cafeteria plan has no limit on the contributions by either the employee or employer; covers dependant care; covers transportation costs; and has no medical insurance restrictions. Money in the Section 125 plan may not be carried over to the next plan year. Conversely, the Health Savings Account (HSA) is imposed a limit on funding, does not cover dependant care or transportation costs and must be tied to a High Deductible Health Coverage plan. Money in a HSA plan may be carried over to the next plan year.
Related Questions
- Do I have to be enrolled in a High Deductible Health Plan (HDHP) to contribute into an HSA (Health Savings Account)?
- Does the Pool offer a High Deductible Health Plan that qualifies for a Health Savings Account?
- Why establish a Section 125 Cafeteria plan vs. Section 105 or Health Savings Account 125 plan?
