Content AreaHannah is an employee of Bolero Corporation. Bolero pays the medical insurance premiums of all of its employees. Because of large deductible levels and limitations on the payment of certain medical expenses, the basic health insurance policy does not cover all medical costs. During the current year, Bolero adopted a flexible benefits plan that employees can contribute to in order to pay for any medical expenses not covered by insurance. Hannah pays $2,750 into the plan during the current year. Premiums paid by Bolero for Hannah's medical insurance were $5,000. I. Hannah's gross income from her Bolero salary is reduced by the $2,750 payment into the flexible benefits plan. II. Amounts paid for medical costs by the medical insurance policy are excluded from Hannah's gross income