IRC Section 125 allows participants to convert a taxable benefit (salary) into nontaxable benefits. Utilizing a Section 125 plan, you may elect to pay for eligible unreimbursed Health Care expenses (such as deductibles and co-payments) and/or Dependent Care expenses, including care for a child, elderly parent or disabled spouse on a tax-free basis. IR Section 132 Transportation/Parking Benefit Section 132 allows employees who ride public transportation, carpool/vanpool to work or who pay for parking while at work to pay an amount of those costs with untaxed earnings. The monthly pre-tax amounts allowed for 2006 are $105 for transportation and $205 for parking. These amounts usually increase each year. There is no “use it or lose” restrictions on these benefits. IR Section 105 Health Reimbursement Arrangement Section 105 allows Employers to establish employer funded medical accounts for their employees. The HRA account is usually offered as a substitute to “no insurance offered” or a high deductible policy. Since the HRA accounts belong to the Employer, he has full control of the rules in determining when the funding takes place, what expenses qualify for reimbursement, how much unused funds are accumulated for possible future use and what happens to the funds upon termination or retirement. The HRA is used to reduce Health premiums without major reductions in health benefits, and, when allowed to accumulate, acts as a retention tool for your valued employees. THE RESULT Employees pay lower payroll taxes and consequently have more spendable income. For most employees, FSAs are the only way to gain a tax break for medical expenses. With medical expenses deductible on income tax returns only to the extent they exceed 7.5 percent of adjusted gross income, relatively few people are ever able to qualify for the itemized medical deduction. Most working parents with child-care expenses find the dependent-care FSA provides a bigger tax benefit than by claiming the child-care tax credit, by up to $1,500.00! Switch expenses to "before tax" and SAVE. TAX SAVINGS EXAMPLE 28% Federal Tax and 6% State Tax Without Spending Account With Spending Account Monthly Salary   $3,000.00   $3,000.00 Pre-tax FSA contribution   $0.00   $500.00 Taxable Salary   $3,000.00   $2,500.00 Federal Income tax & FICA   $1249.50   $1041.25 Take-home pay   $1750.50   $1458.75 After-tax expenses   $500.00   $0.00 Net take-home pay   $1250.00   $1458.75 Increase in monthly spendable income   N/A   $208.75 Increase in annual spendable income   N/A   $2505.00 Medical FSA - Dependent Care FSA - Health Reimbursement Arrangement - Transit/Parking FSA BENEFLEX Inc. (800) 925-4087