The YourSource cafeteria plan or “Flex Spending Account” enables an employee to redirect a portion of their salary into two specific types of expenses: Dependent care (DDC) and un-reimbursed medical (URM) expenses. A cafeteria plan gives the employees an opportunity to pay for any medical expenses or childcare that have not already been paid by you, the employer. These expenses will be deducted from their paycheck before their earnings are taxed.

Prior to the beginning of each plan year, an employee will elect a specific dollar amount for each type of expense, which will be redirected from their salary. Dependent care expenses may not be paid from an un-reimbursed medical expense account and vice versa.

Redirecting part of an employee’s salary into a flexible spending account(s) means that their taxable income will be calculated after the elected amounts for dependent care and/or un-reimbursed medical expenses are deducted from their salary. They will not have to pay federal income tax, Social Security tax, and/or state income tax on the elected amounts.