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Section 125 flexible benefits

Carroll County Public Schools

Brad Hawks

2025

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What we’ll cover today

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What is a Section 125 plan?

Flexible Spending Accounts (FSAs)

Health Savings Accounts (HSAs)

Supplemental benefits

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History

Founded by two Springfield, IL teachers in 1945
403(b) retirement savings programs since 1961

Commitment

Discounted products, features and services designed for school employees
Educational workshops, online tools and individual benefit consultations to help employees understand their retirement options

Partnerships

Strong relationships with educational associations
DonorsChoose funding for classroom supplies
Student Loan Solutions program
Teacher and staff recognition programs

Horace Mann dedication

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What is a Section 125 plan?

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Also known as a Cafeteria Plan or Flex Plan

IRS instituted in 1978

Plan established by employer

Allows for certain pre-tax payment of medical premiums, unreimbursed medical expenses and dependent care expenses

Employees contribute elected amounts using regular pre-tax payroll reductions

Employees are reimbursed for approved expenses, or some expenses may be paid using optional debit card issued by plan services provider

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Flexible Spending Accounts

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What is a Flexible Spending Account (FSA)?

An FSA lets you set aside pre-tax money from your paycheck for eligible out-of-pocket expenses while increasing your take home pay.

Two types of FSAs

Health Care FSA

Dependent Care FSA

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Health Care FSA

A pre-tax benefit account that pays for eligible expenses not covered by insurance

Medical expenses

Dental expenses

Vision expenses

A smart, simple way to save money and keep you and your family healthy and protected

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How a Health Care FSA works

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Determine how much to contribute

Estimate how much you’ll need
Elect how much to contribute

Funds are taken from your paycheck before taxes

Save an average of 30% on eligible health care expenses

Savings result from lower overall taxes^*

* Assumes a combined tax rate of 30%, including FICA, state and federal income taxes. Actual amounts may vary.

A Health Care FSA works by setting aside some of your pay before taxes are deducted. The money is still yours to spend on eligible expenses, but you don’t pay taxes on it.

Before you enroll, you should estimate your health care expenses for the upcoming year, so you can decide how much to set aside through your FSA. Review the examples and worksheet in your enrollment materials, then choose how much to defer in each account when you enroll.

You save by reducing the amount of your income that’s subject to federal income tax, FICA (Social Security) tax, and in most states, state income tax. Exactly how much you save depends on how much you spend on health care and dependent care expenses each year and on your tax situation. Most people can save from $30 to $40 in taxes for every $100 set aside through their FSA.

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Health Care FSA eligible expenses

Prescriptions for almost any medical condition
Prescribed over-the-counter medicines, such as aspirin and cough syrup
Co-payments, co-insurance and deductibles
Dental care, both preventive and restorative
Orthodontia, child and adult
Vision care, eyeglasses, contact lenses, solutions
Eye surgery, including laser vision correction
Counseling and therapy
Psychology and psychiatry
Chiropractic care and acupuncture

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Health Care FSA limits

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If you and your spouse have a Health Care FSA, you can each �contribute $3,300.

Your entire contribution is available at the beginning of the plan year.

Your funds can be used by you and your spouse, child (up to age 26) �or tax dependent who is permanently and totally disabled.

The IRS annual Health Care FSA pre-tax contribution limit is $3,300

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Dependent Care FSA

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Preschool or before/after school programs

Summer day camp

Elder day care

A pre-tax benefit account that pays for eligible expenses not covered by insurance

A smart, simple way to save money while taking care of loved ones so you can work

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Dependent Care FSA limits

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Who qualifies?

Dependent child under the age of 13 who lives with you for more �than half of the year

Spouse or other tax dependent who resides in the house a minimum of eight hours a day and requires assistance with day-to-day living

The IRS annual dependent care FSA pre-tax contribution limit is $5,000 per family

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Dependent Care FSA expenses

Before/after school care

Au pair services

Extended day programs

Preschool/nursery school

Summer day camp

Elder day care

Overnight camps

Kindergarten or higher-grade tuition

Non-work-related day care

Long-term elder care services

Eligible expenses

Ineligible expenses

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What’s the benefit of an FSA?�Here’s an example of how having an FSA can help reduce your taxes and increase your take home pay�

The above example is based on 7.65% FICA and 15% tax bracket.

Note: Be advised that this example is for illustrative purposes only. These projections are only estimates of tax information and should not be assumed to be tax advice. Be sure to consult a tax advisor to determine the appropriate tax advice for your situation. Actual tax savings depends on several variables, including state and local tax rates and the tax bracket of the individual.

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Annual salary	Health care �FSA annual contribution	Dependent care FSA annual contribution	Savings
$30,000	$1,500	$0	$340
$50,000	$1,750	$4,000	$1,303
$70,000	$2,000	$4,500	$1,472

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Using your FSA funds

Health care debit card

Pay with cash, check or a personal credit card and select “Pay me �Back” from your account to submit a claim:

Online
Mobile app
Fax or email

Use “Pay my Provider” to pay providers directly from your account

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Any unused funds left in your FSA may be forfeited at the end of the plan year.

You have until 12/31 to incur expenses for the current plan year
You have until 3/1 to submit claims to pay yourself back from your account

A few reminders…

Changes to your election amount can be made only if:

Change in legal marital status
Change in number of dependents due to birth, adoption or death
Change in employment status
Change in cost or coverage charges

For your Health Care and Dependent Care FSA, you can incur expenses through 12/31, and have until 3/1 to submit a request for reimbursement of services incurred 1/1 through 12/31.

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Health Savings Accounts �

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Health Savings Account (HSA)

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For more information, visit http://www.irs.gov/publications/p15b/ar02.html

Eligibility	Employees enrolled in a High Deductible Health Plan (HDHP)
Contributions	Employer and employee
Contribution limits	Individual: $4,300 Family: $8,550 Individuals over 55 can make a $1,000 “catch up” contribution
Contribution changes	Yes
Balance rollover	Yes
Portable	Yes
Eligible expenses	See IRS Publication 502

An HSA is a pre-tax account that helps you pay for qualified medical expenses that do not apply toward your deductible

Health Savings Accounts (HSAs) are only available to employees enrolled in a High Deductible Health Care Plan
Both the employer and the employee can contribute to the account
The IRS determines what the maximum contribution can be. In 2025 it is $4,300 for an individual and $8,550 for a family. Individuals over age 55 can make a $1,000 catch-up contribution.
Employees have flexibility to change their HSA contributions throughout the year.
In contrast to FSAs, the HSA is similar to a 401(k). HSAs are the only triple-tax advantaged accounts available, allowing employees to:

Contribute pre-tax funds
Earn interest that is not taxed
Enjoy tax-free distributions (to cover their qualified medical expenses)

The contributions and savings roll over from year to year.
The funds are portable and stay with the employee, even if he or she changes jobs or health plans.
For a list of eligible expenses, see IRS Publication 502.

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Claim Processing �

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Health Care debit card

An easy way to pay for eligible expenses allowed under the plan with your available funds

Pay instantly
Works like a debit card
Funds come directly from your Health Care FSA or HRA accounts
No PIN required

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Health Savings Account debit card

An easy way to pay for eligible expenses allowed under the plan with your available funds

Pay instantly
Works like a debit card
Funds come directly from your Health Savings Account
No PIN required

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Mobile app

File a claim and get reimbursed quickly

View transactions and account balances using a single login

Snap photos of receipts and submit them for payment

Receive confirmation emails when claims are received, processed or paid

Receive text messages when card verification �is required, a transaction is denied or a �claim has been processed

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Important HSA IRS regulations

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Employee cannot be claimed as a dependent on another person’s tax return

Employee cannot be covered by another major medical plan, such as Medicare

Tax-free money can be used by employee, spouse and tax-dependents

20% penalty tax applied if funds are used for ineligible expenses prior to age 65

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Supplemental benefits

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What are supplemental insurance products?

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National Teachers Associates Life Insurance Company, a Horace Mann Company, underwrites Horace Mann supplemental insurance products. Not all products available in all states.

Supplemental insurance products pay cash directly to you to help cover out-of-pocket medical expenses, living expenses or “whatever you need” expenses due to a covered injury, sickness or qualifying disability.

Supplemental insurance products pay in addition to other medical insurance benefits and other supplemental plans.

There are several types of supplemental insurance products, including:

Cancer

Heart

Accident

Hospital

Disability

Pre-tax benefits

Post-tax benefit

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Why are supplemental insurance products important?

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47% �of the cost of a covered illness is covered by medical insurance

Hospital room and board
Drugs and medicine
Surgeon’s fees

53% �of the cost is not covered by most medical plans

Loss of income
Transportation costs
Childcare expenses
Deductibles
Co-insurance
Food and lodging

Calculated from Total Cost of Coronary Heart Disease. Cardiovascular Disease: A Costly Burden For America – Projections through 2035. 2017, American Heart Association.

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Cancer insurance

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In 2019, more than 1.7 million new cancer diagnoses were expected in the U.S., resulting in $80.2 billion of direct medical costs.¹

The first time a Covered Person is diagnosed while coverage is in force and verified with a pathology report, Cancer insurance products provide a one-time Express Payment benefit. The Express Payment benefit is not available for a diagnosis of skin cancer.

Cancer insurance products typically include the following benefits:

Cancer screenings
Chemotherapy, radiation and other treatments
Hospital confinement due to covered cancer
Surgery due to cancer
Family transportation and lodging
Pain management, such as acupuncture and anti-nausea medication
Fertility treatment due to covered cancer
Experimental treatment

¹Cancer Facts and Figures 2019 – American Cancer Society

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Heart insurance

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Cardiovascular disease remains the number 1 cause of death in the U.S., and 44% of the U.S. population is projected to have some form of cardiovascular disease by 2030.¹

Heart insurance products offer valuable benefits whether an insured is in or out of the hospital. The Initial Occurrence benefit is provided when a doctor diagnoses a Covered Peron’s first heart attack or stroke while coverage is in force.²

Heart insurance products typically include the following benefits:

Heart screenings
Diagnostic or emergency room procedures for a covered condition
Ambulance trips to or from a hospital for a covered condition
Hospital confinement
Surgeon’s fees
Heart transplant
Private duty nurse
Cardiac implanted device
Family transportation

¹ Heart and Stroke Statistics 2017 update, American Heart Association.

² In VA, the Initial Occurrence Benefit is provided for the first day or more of confinement in a hospital for heart disease or carotid artery disease.

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Accident Insurance

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Every hour, there are more than 5,000 accidents in the U.S. that require consultation with a medical professional.¹

Accident Insurance products include benefits for emergency care and covered hospitalization due to a covered injury.

Accident insurance products typically include the following benefits:

Covered treatment in an ER, an emergency care clinic or with a medical practitioner
Diagnostic imaging like X-rays, MRIs or CT scans
Hospital confinement
ICU confinement
Ambulance
Surgery
Accidental death

¹ 2017 data from National Safety Council Injury Facts, 2017 edition Center of Disease Control,

U.S. Statistics

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Disability income insurance

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At the bottom line, your ability to earn an income is your most important asset.

Disability income insurance products allow you to select a monthly benefit amount, subject to income replacement restrictions, that will be paid if you can’t work due to a qualifying sickness or injury.

It pays in addition to sick leave, workers’ compensation and social security. And also provides coverage for qualifying sickness or injury whether you are on or off the job, no matter where you are.

Disability income insurance product benefits may include:

Total disability
Hospital confinement
Physician consultation
Childbirth event

¹Council for Disability Awareness, Disability Income Awareness Month 2019 Fact Sheet

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Hospital insurance

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The average hospital stay:

lasts 6.1 days¹
costs $3,949 per day¹
costs a total of $15,734¹

And when only 34% of hospital care costs are paid for by private health insurance, you may be left with the remaining 66%.¹

Whether you’re in the hospital or healing at home afterward, the looming fear of out-of-pocket expenses can make it difficult to focus on self-care. Hospital insurance coverage can help provide protection against costs associated with a hospital stay due to a covered injury or illness.

Hospital insurance product benefits may include:

Hospital inpatient admission
Daily inpatient hospital confinement
Observation

¹CDC/National Center for Health Statistics, 2017 Debt.org, America's Debt Help Organization, 2017

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Supplemental benefits designed for you

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Affordable

Flexible

Portable

Simple

Convenient

Affordable: Supplemental insurance products are affordable and available to fit almost every budget. Plans can be chosen one at a time or purchased together.

Portable: Supplemental insurance products are portable, meaning owners can take them with them when they retire or switch jobs.

Convenient: Premiums can be paid via payroll deductions (if offered by your employer), bank draft or credit card.

Flexible: Cancer, Heart and Accident Insurance products are all available with Individual, One Parent and Family coverage options.

Simple:

The claims filing process is easy and most can be filed online with clearly defined prompts.
Benefit payments can be direct deposited into the owner’s bank account. They simply fill out the Payment Authorization forms, and money can be deposited directly into a checking or savings account.
No physical examinations are required to apply. Employees simply apply and answer the health questions (application subject to approval).

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What’s next?

Use this link to enroll: (insert link here and/or QR code below)

Schedule your personalized enrollment session where you can get help with:
More in-depth information on the plan
Determining how much to contribute to your FSA
Information on the other products and services we offer

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Thank you!

Brad Hawks

276-223-1131

Brad.Hawks@horacemann.com

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