Accounting for Section 125 Cefeteria plans (US)

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Accounting for Section 125 Cefeteria plans (US)

Tim Wunder (Lists)
My company will be instituting a Section 125 Cafeteria plan (flexible spending
account) for medical expenses. Starting January 1, 2006, my flexible spending
account will have $1000 available to it. Each payday (weekly), a specific
amount of money (1000/<53 or 52>) will be deducted from my pay pre-tax and be
designated for the flexible spending account. So, at the start I will only
have a small amount actually deducted from my income assigned to the flex
account, the full $1000 will be available for me to use for medical expenses.

How should I configure gnucash (1.8.11) to account for this?
I'm thinking I should at least set up an asset account for the $1000. That's
the easy part. The hard part (for me) is determining what account that $1000
comes from, and what account the weekly deductions should be updating.

My current thinking is that I should set up an Income account, Income:Flex
from which a transfer of $1000 will be made to credit the Income:Flex account
and debit the Assets:Flex account on January 1 (when the money will become
available for use). Each week I'll add a split to my payday transaction that
currently credits Income:Salary the amount of the specific pre-tax payroll
deduction as a debit to Income:Flex the amount (along with other debits to
Assets:Checking, Expenses:Tax, etc...).

Is that right?
Seems like it to me, but I'd like to throw it out there so (perhaps) someone
who might actually know how it's s'posed to be done.

Thanks,
Tim
--
Fedora Core release 4 (Stentz), Linux 2.6.14-1.1644_FC4
KDE: 3.5.0-1.7.fc4.kde, xorg-x11-6.8.2-37.FC4.49.2
 11:30:06 up 1 day, 21:57,  4 users,  load average: 0.27, 0.47, 0.28
MP3/OGG archive Total playlength : 7 days, 16 hours, 27 mins 40 seconds
"It's what you learn after you know it all that counts" John Wooden

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Re: Accounting for Section 125 Cefeteria plans (US)

Derek Atkins
IANAA but how I would set this up:

Assets:FLEX
Liabilities:FLEX

At the beginning of the year, xfer $1000 from L:F -> A:F
Then at every pay period, split your FLEX deduction into L:F from your
normal Income:Salary account.
When you USE your flex money, use it from A:F -> Expense:Medical:whatever.

The difference between the Asset and the Liability is how much you lost
or owe.

You could probably do it as contra accounts instead, if you prefer:

  --Flex
     +--To Spend (Asset)
     +--To Deduct (Liability)

Same rules as above.

-derek

Quoting Tim Wunder <[hidden email]>:

> My company will be instituting a Section 125 Cafeteria plan (flexible
> spending
> account) for medical expenses. Starting January 1, 2006, my flexible spending
> account will have $1000 available to it. Each payday (weekly), a specific
> amount of money (1000/<53 or 52>) will be deducted from my pay pre-tax and be
> designated for the flexible spending account. So, at the start I will only
> have a small amount actually deducted from my income assigned to the flex
> account, the full $1000 will be available for me to use for medical expenses.
>
> How should I configure gnucash (1.8.11) to account for this?
> I'm thinking I should at least set up an asset account for the $1000. That's
> the easy part. The hard part (for me) is determining what account that $1000
> comes from, and what account the weekly deductions should be updating.
>
> My current thinking is that I should set up an Income account, Income:Flex
> from which a transfer of $1000 will be made to credit the Income:Flex account
> and debit the Assets:Flex account on January 1 (when the money will become
> available for use). Each week I'll add a split to my payday transaction that
> currently credits Income:Salary the amount of the specific pre-tax payroll
> deduction as a debit to Income:Flex the amount (along with other debits to
> Assets:Checking, Expenses:Tax, etc...).
>
> Is that right?
> Seems like it to me, but I'd like to throw it out there so (perhaps) someone
> who might actually know how it's s'posed to be done.
>
> Thanks,
> Tim
> --
> Fedora Core release 4 (Stentz), Linux 2.6.14-1.1644_FC4
> KDE: 3.5.0-1.7.fc4.kde, xorg-x11-6.8.2-37.FC4.49.2
> 11:30:06 up 1 day, 21:57,  4 users,  load average: 0.27, 0.47, 0.28
> MP3/OGG archive Total playlength : 7 days, 16 hours, 27 mins 40 seconds
> "It's what you learn after you know it all that counts" John Wooden
>



--
       Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
       Member, MIT Student Information Processing Board  (SIPB)
       URL: http://web.mit.edu/warlord/    PP-ASEL-IA     N1NWH
       [hidden email]                        PGP key available

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