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MISSISSIPPI DIVISION OF MEDICAID Eligibility Policy and Procedures Manual CHAPTER 200A – Income: ABD Categories Page |102 Effective Month: July 2025 Payroll Deductions Payroll deductions used to purchase cafeteria-plan benefits are the employee’s wages and are earned income. For example, employees who want more than basic benefits contributed by the employer may pay additional costs through payroll deductions. The amounts of those voluntary payroll deductions are the employee’s wages and are considered earned income for Medicaid purposes. Unless an exception applies, FICA will be deducted from these payroll deductions. NOTE: Be aware that paystubs that appear to show voluntary payroll deductions may actually show how funds from a salary-reduction agreement are allotted among qualified benefits. Cash Received Under a Cafeteria Plan Cash received under a cafeteria plan in lieu of benefits is wages. However, cash received as reimbursement for qualified-benefit expenses, such a childcare, is not income. Example: ABC, Inc., contributes $50 per week to fund basic benefits under a cafeteria plan. Mr. White selects insurance that costs $35 per week and opts for a weekly cash payment of $15 in lieu of additional coverage. The $15 cash payment is part of Mr. White’s countable wages. Determining Countable Income under a Cafeteria Plan When a cafeteria plan is involved, countable wages for Medicaid purposes can be less than the gross amount on the check stub. It can be difficult to tell whether paystubs represent payroll deductions, which are part of gross wages, or cafeteria-plan itemizations, which are not. One indicator is when the deduction for Social Security and Medicare taxes is less than the tax rate times the gross wages shown on the check stub. A cafeteria plan is also indicated when the pay stubs use terms such as: • FLEX • CHOICES • Sec. 125 • Cafe Plan To determine countable wages when there is Cafeteria Plan participation, take the following steps: • If the paystub shows FICA wages or equivalent, use the FICA wage amount as countable wages, otherwise: • Multiply the gross amount shown on the check stub by 7.65% or .0765 (or by