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San Joaquin Health Care 2004 JPA Handbook

Cafeteria Plan
In addition to providing medical, dental and vision benefits, the SJJPA also offers each district the option of providing a Cafeteria Plan to its employees. To find out if you are eligible for this benefit, please contact your personnel department.
Under IRC regulations, an employer may offer their employees the option of paying for eligible dependent care and un-reimbursed health care expenses on a pre-tax basis. A Cafeteria Plan allows you to pay for day care for your dependents and other health care expenses not covered by your health plan, without paying payroll withholding taxes on those funds. By directing part of your salary into your own flexible spending account(s), your tax liability is permanently reduced.

If you choose to participate in the Cafeteria Plan, it is important to consider the application of three IRC rules governing the Plan:

    Irrevocable Election Rule
    You may not modify or revoke coverage elections during a plan year unless there is a qualifying change in family situations (i.e., marriage, divorce, death of a spouse or child, birth or adoption of a child, termination, commencement of employment or reduction of hours or change in dependent care costs.)

    Use It or Lose It
    Any unused money in your account at the end of the plan year will not be returned to you. Amounts remaining after the run-off period will be forfeited to the Plan. The IRC does not allow refunding money for which payroll withholding taxes have not been paid.

    No Transfer
    As with the first two conditions, the IRC does not allow you to transfer funds between your dependent care account and your un-reimbursed health care spending account.

Why It Is Called A Cafeteria Plan
It is called a Cafeteria Plan because you may select various benefits from a list of choices. Much like eating in a cafeteria, you move through the ‘line’ selecting what you want to eat – or, as it relates to benefits, the specific benefits you determine your family needs for adequate coverage. It is technically referred to as a Section 125 Plan because it is regulated under the Internal Revenue Code Section 125.


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San Joaquin JPA Handbook 2004