Educate Yourself - Under the Oak

Home

Past Questions

Main

Question: Do you have a flexible plan? I was told that they are valuable.

Alison Bates

Answer:

Dear Ms. Bates,

I think you must be referring to a Flexible Benefits Plan.

No, brokerage firms do not have such plans for the public. However, many companies as well as local and state government employers offer this nice perk to their employees. If you are currently working, check with your benefits officer or boss to see if your company has such a plan.

Flexible Benefits Plans vary widely from company to company but in general, the program, authorized under Section 125 of the Internal Revenue Code, is designed to help employees reduce taxes. In other words, you pay for specifically-stated benefits from your pre-tax income rather than your after-tax income.

Note: Some plans also offer taxable benefits, such as cash.

Among the most commonly offered benefits are: life, health and dental insurance; qualified child or other dependent day care; retirement plans and vacation pay.

For example, the City of San Diego offers:

Employee Health Insurance (several policies available)
Employee Life Insurance (several policies available)
Dependent Health Insurance
Vision and/or Dental Plans
401K Plan (tax deferred)
Dependent Care Reimbursement
Dental/Medical/Vision Reimbursement
Cancer/Catastrophic Illness Protection Plans
Cash (taxable)

You are not required to pay federal income tax or Social Security tax on that part of your salary you spend through the plan on any non-taxable offerings. Some companies call their plans cafeteria plans because the employee selects the benefit or benefits that suit her the best from a fairly large menu of options.

More Information

If you would like additional details prior to speaking with your office manager, I recommend checking with Benefit Consulting, Inc. This firm helps employees set up and manage the plans and has thorough knowledge on the topic. Their information, posted at www.benefitconsultinginc.com, is clearly presented and not too technical. Begin with the FAQ section.

Good luck!

The BUYandHOLD website contains links to third-party websites on the Internet. BUYandHOLD provides these links to these websites only as a convenience to users of the website. Links on the BUYandHOLD website are not endorsements by BUYandHOLD or Freedom Investments, implied or express, of the linked sites or any products, services or links in such sites; and no information in such sites has been endorsed or approved by BUYandHOLD. Linked sites are not under the control of BUYandHOLD or Freedom Investments, and we are not responsible for the contents of any linked site or any link contained in a linked site. No information contained in the BUYandHOLD website or accessed through any linked site, or any link contained in a linked site, constitutes a recommendation by BUYandHOLD or Freedom Investments to buy, sell or hold any security, financial product or instrument. Information accessed through linked sites is not, nor should be construed as, an offer or a solicitation of an offer, to buy or sell securities by BUYandHOLD or Freedom Investments. BUYandHOLD does not offer or provide any investment advice or opinion regarding the nature, potential, value, suitability or profitability of any particular security, portfolio of securities, transaction or investment strategy, and any investment decisions you make will be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs.