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Cafeteria Plan Section 125 of the IRS code is an employer sponsored program that allows employees to use pre-tax dollars to pay for certain qualified benefits. The plan allows each participant to choose among two or more qualified benefits and cash. The plan may be funded with employer contributions, employee contributions or a combination of both. Calendar Year A year that begins January 1 and ends December 31. Catch Up Contribution Additional contribution for individuals who have attained age 55 by the end of the taxable year and are also not enrolled in Medicare. This catch up contribution is $700 for 2006. It increases by $100 each year, up to $1,000 for taxable years beginning in 2009. Contribution A deposit made to a health savings account. Deductible The minimum amount of health care costs you must pay before your health insurance coverage begins to cover costs. Eligible Individual Generally any individual with qualifying HDHP coverage, as long as the individual does not have any other disqualifying health coverage. Two groups of individuals who are not eligible for an HSA are individuals claimed as a tax dependent and individuals enrolled to Medicare. Eligible for Medicare To be Eligible for Medicare, an individual generally must be eligible, by age or disability, but not enrolled. Embedded Deductible An individual deductible within the family deductible that is lower than the minimum required deductible for High Deductible Health Plan family coverage. Entitled to Medicare To be Entitled to Medicare, an individual generally must be both eligible and enrolled. FICA Federal Insurance Contributions Act - a tax on employees and employers that is used to fund the Social Security system. Flexible Spending Accounts (FSA) A pre-tax program offered by employers through the Section 125 Cafeteria Plan. It allows an employee to pay for eligible out-of-pocket health care expenses (Health FSA) and dependent daycare expenses (DCAP) with pre-tax dollars. FUTA Federal Unemployment Tax Act; The tax that employers pay to fund unemployment compensation programs. HDHP High Deductible Health Plan - A health plan that meets certain legislative and regulatory requirements for minimum annual deductibles and maximum out-of-pocket expenses according to Code 223(c)(1) to become eligible to contribute to an HSA. The health plan typically has a minimum deductible of at least $1,000. HRA Health Reimbursement Arrangement - A special reimbursement arrangement established and maintained by employers that is funded solely by employers for the purposes of paying for medical expenses not covered under the employer's health plan. HRAs are not portable from job to job like Health Savings Accounts, but the money left in an HRA at the end of one year does roll over to the next year. HSA Health Savings Account - Tax-favored trust accounts that eligible individuals who are covered by high deductible health plans (HDHPs) can establish to pay for covered medical expenses of the eligible individuals, their spouses and/or their tax dependents. Limited Purpose Health FSA A limited-purpose health FSA is a Flexible Spending Account that only reimburses certain expenses such as dental, vision, or preventative health care expenses, even if the annual deductible of the high-deductible health plan has not been met. Limited Purpose Health HRA A limited-purpose health HRA is a Health Reimbursement Arrangement that only reimburses certain health care expenses (such as dental, vision, or preventative) and certain insurance premiums (such as indemnity, long-term care, and specific disease insurance), even if the annual deductible of the high-deductible health plan has not been met. Non-qualified Withdrawals Withdrawals that do not qualify as a reimbursable medical expense. Out-of-Pocket Costs Insured health care costs for which one is responsible, because of the application of deductibles, coinsurance and co-payments. Out-of-Pocket Maximum The most money you will be required to pay in a year for deductibles and coinsurance for covered expenses. It is a stated dollar amount set by the insurance company, in addition to regular premiums. Permitted Coverage Permitted coverage includes (whether provided through insurance or otherwise) coverage for accidents, disability, dental care, vision care, or long-term care. Portability For an HSA, portability means that the HSA goes with the account owner even when they change employers. They may still use the funds that have accumulated in the HSA for qualified medical expenses, but can no longer contribute. Qualified Medical Expenses Medical expenses that the IRS had determined to be eligible for tax-free payment out of a health savings account. RRTA Railroad Retirement Tax Act - The law that provides for railroad retirement benefits. |
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