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What are Section 125 Cafeteria Plans?

Bookmark and Share Section 125 Cafeteria Plans refer to an employee benefit that allows you to pay certain expenses with pre-tax dollars. With this benefit, you maximize your income and reduce your tax burden.

What are Section 125 Cafeteria Plans?

These employee benefit plans get their names from Section 125 of the IRS Code. With Section 125 Plans, you deposit pre-tax dollars into a special account and use those funds to pay qualified expenses. The funds in these plans are exempt from federal, state, Social Security, Medicare, FICA and FUTA taxes.

You could save up to 50 cents for every dollar you contribute to a Section 125 Plan account. It's a beneficial way to reduce your taxable income and increase the disposable income in your paycheck every week.

You may choose from several types of Section 125 Cafeteria Plans, including Premium Only Plans and Flexible Spending Accounts.

  • Premium Only Plan (POP) - Your employer deducts your health insurance premiums before deducting taxes from your paycheck.
  • Flexible Spending Account (FSA) - You choose an amount of money you'll contribute to your FSA and then use the funds to pay eligible expenses.
According to the IRS, employers must offer Section 125 plans to all eligible employees. They cannot discriminate based on protected statuses or your job description, pay rate or seniority.

What Expenses do Section 125 Cafeteria Plans Cover?

Depending on your specific Section 125 Cafeteria Plan, you may use it to pay expenses related to:

  • Adoption expenses
  • Dependent care
  • Group term life insurance premiums
  • Health savings account premiums
  • Medical treatment
  • Supplemental insurance such as accident, cancer, dental or vision insurance
  • Transportation expenses
How to Enroll in Section 125 Cafeteria Plans

Talk to your Human Resources department for details on enrollment in Section 125 Plans. Many employers hold an open enrollment for benefits during December, but your company's enrollment date may vary.

How to Take Distributions From Section 125 Cafeteria Plans

Submit requests for reimbursement to your HR department. Usually, you don't have to wait until the end of the year to withdraw funds for medical expenses from your Section 125 Cafeteria Plan. As soon as you have a qualified expense, you can take money from your account. This uniform coverage rule does not apply to a dependent care FSA.

Remember that you will lose any funds you don't withdraw since they do not carry over to the next year. Track your contributions on your pay stub or ask your HR manager.

Section 125 Cafeteria Plans help you save for qualified expenses and give you extra cash in your paycheck. They also help you budget for medical and dependent care expenses, so consider opening an account this year.

Low-Wage Labor Violations

Bookmark and Share An extensive survey of more than 4,000 low-wage workers in Los Angeles, Chicago, and New York City by the National Employment Law Project (NELP) reached these conclusions:
  • More than one in four workers surveyed (26%) were paid less than minimum wage.
  • Among these workers, 16% were underpaid by more than one dollar per hour.
  • More than three in four (76%) workers who worked overtime were not paid for their time. The average worker had put in 11 hours that were either underpaid or not paid at all.
  • Women and foreign-born workers were victimized more than anyone else.
  • The average wage theft was 15% of earnings.
Additional violation categories included:
  • Off-the-clock
  • Meal breaks
  • Pay stubs
  • Illegal deductions
  • Tips
  • Illegal employer retaliation
  • Workers Compensation violations
It is hard to balance this economic suffering with the fact some executives are making tens of millions of dollars during a failing economy. You don’t have to be of any political persuasion to realize that something’s out of whack. Not only do these employers deprive good people of a fair day’s pay, they’re also at war with companies who strive to grow their business the right way; perhaps even going above the call and actually empowering their workers rather than oppressing them. If we can fight overseas to assure basic human rights, we should be able to do the same here.

Benefits of Prescription Drug Insurance

Bookmark and Share Prescription drug coverage is a benefit many employers offer. You can use it to pay for your medications and improve or maintain your health.

What is Prescription Drug Coverage?

Most employers offer prescription drug coverage as part of your healthcare benefits package. With this coverage, your insurance pays for the medications your doctor prescribes after you pay your deductible any co-pays.

How to Choose Medications

Your coverage's formulary list can help you and your doctor choose medication. All the medicines on this list are reviewed by healthcare professionals and are safe and effective. However, they are divided into tiers that determine their price.

  • Tier 1 - Primarily generic, tier 1 drugs provide the same medical benefits as brand-name drugs at a lower cost.
  • Tier 2 - Find many effective and affordable brand name and some generic drugs in tier 2.
  • Tier 3 - Non-preferred brand name drugs will cost more than equivalent generic or preferred medicines.
  • Tier 4 - Drugs in this tier are usually self-administered injectables or specialty drugs that treat chronic or serious conditions and require special handling, monitoring or administration. They are the highest priced drugs available.
Consult the formulary list as you decide which medications you can afford.

How to Fill Prescriptions

Many prescription drug coverage plans make filling prescriptions easy. You can visit a participating retail pharmacy in person with your prescription and member ID card or request medication through a mail order pharmacy. Both of these options include access to pharmacists who can answer any questions or concerns you may have.  

You may also visit a non-participating pharmacy. However, you'll be responsible to pay the full cost of the medicine when you pick it up. You may then submit a claim form to your prescription drug plan administrator before you receive reimbursement.

Maximize Your Prescription Drug Coverage

Several tips help you maximize your prescription drug coverage and save money while staying healthy.

  • Print your prescription plan's formulary list and ask your doctor to prescribe a tier 1 or tier 2 drug if possible.
  • Ask your doctor about step therapy where you try a less costly medication before a more expensive alternative.
  • Obtain prior authorization for prescriptions from your insurance plan.
  • Choose an in-network pharmacy.
  • Select mail order delivery.
  • Buy 90-day supplies of maintenance medicines used to treat asthma, high cholesterol, high blood pressure or other conditions.
  • Choose a plan that includes most of your medications in tier 1 or 2.
  • Shop around during your company's open enrollment for the most affordable prescription drug coverage plan.
Your prescription drug coverage is an important feature of your employee benefits plan. Get more details from your HR manager as you protect your health.

1,500 of Wasted Time on Busywork

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"Work can be a life-draining affair." Joseph Campbell
Effective time management is essential if you wish to be a successful HR executive -- and have a life at the same time. According to CEO surveys, when HR professionals focus their time on administrative and compliance duties (positions in which one is particularly likely to say "no") their companies don't see them as being strategic partners to the business. The problem is that HR executives spend an average of only 25% of their time on strategic activities. From a career and company goals perspective, this is akin to orchestrating their own demise.

When I advise HR executives to manage their time more effectively by minimizing administrative and compliance activities, I get a variety of "reasons" why they don't do so:

This simply has to get done.
Somebody has to do it.
I don't have the time to delegate this right now.
There's nobody else here to do it.
I'm not sure I would know how to delegate it properly.
I can't manage the person to whom I delegated it.

These are all poor excuses that can block your career success.

Let's think about some numbers. Suppose you spend an average of 10 hours a week managing payroll and other administrative tasks. Let's say you earn $40 per hour (roughly $80,000 per year) and administrative tasks such as this are the least valuable work you do. In fact, it's work that $20 an hour people can do. On the conservative side, every hour that you do this work, the company loses $20 an hour -- which comes to $800 a month or $9,600 a year. If you put this same effort into doing $60 an hour strategic work instead, the company would gain $20 every hour -- and you'd be in a far better position to ask for a raise.

Think about it: if you waste 10 hours a week for the next three years, that's 500 hours this year, and 1,500 hours during the next three years of your life that you'll never get back! What's more, this waste will cost the company at least $30,000.

If you label your work as "A", "B," and "C" work, you should be spending 80% of your time on A Work, 20% on B work -- and zero time on C work. Otherwise, you're spinning your wheels.

C work basically wastes time completely. It's nothing you can delegate; it's just something you should stop doing. B work is administrative and can be delegated or outsourced -- such as payroll and benefits administration. Focus on A work: What the business needs and what you want to get great at doing. A classic example would be training in a company that's focused on technological advances.

To determine where your time is going -- and should be going -- use this checklist:

A-Level Activities:
  • Meeting with the executive team to understand their vision, mission, value, goals, etc.
  • Studying and understanding the company's strategic plans, financials, succession plan, markets, branding, and other operations.
  • Identifying the critical human resource needs for this organization (surveys, observation, focus groups, interviews, etc.).
  • Input into the company's overall compensation plan, including pay rates, incentives, bonuses, rewards programs, etc.
  • Creating strategic plans and processes for carrying out top objectives.
  • Developing training plans to support implementation.
  • Input into the company's overall risk-management plan, including assistance with the purchase of benefit programs, Workers Comp insurance, Cyber Liability insurance, and Employment Practices Liability insurance (EPLI).
  • Creating systems for hiring, performance, retention and compliance.
  • Facilitating creativity, branding, suggestion systems, etc.
  • Implementing any other company strategic objectives to which you can provide input.
B-Level Activities:
  • Payroll and benefits administration.
  • Implementation of hiring, performance, retention and compliance systems.
  • HRIS management.
  • Delivery of training.
  • Creation of employee handbook and executive contracts.
  • Personnel files management.
  • Attendance, vacation, and leave management.
  • COBRA administration.
  • Compliance posters and handouts.
C-Level Activities:
  • Employee dramas.
  • Meetings that go nowhere.
  • Doing any $10-20/hour work.