- Medical Reimbursement Account: Allows employees to claim expenses such as office visits, prescription co-pays, eye glasses, chiropractors, Lasik, etc.
- Limited Medical Reimbursement Account: Similar to a regular Medical FSA, the Limited FSA is only for dental, vision and post-deductible expense. Complies with IRS guidelines for Health Savings Accounts.
- Dependent Care Reimbursement: Allowable expenses include the cost of care given to a qualified dependent so an employee and their spouse can work or attend school full-time.
- Pre-tax Premiums: Take your monthly premium out of your paycheck pre-tax.
- Adoption Assistance: Allows employees to claim qualified adoption expenses including those fees and related expenses incurred for the adoption of a qualified child.
Advantages to the Employer
6 Ways Companies Benefit by Offering an FSA Plan
- Save 7.65% on every dollar employees contribute to the FSA plan. FICA is not paid on amounts contributed to the FSA plan.
- Lower health insurance premiums by reducing coverage and implementing an FSA plan to help offset the additional employee cost.
- Increase employees’ share of insurance premiums without reducing their take-home pay with a Premium Only Plan (POP).
- Insurance premiums may be reduced for coverages based on employees’ taxable salaries.
- Administrative costs are tax deductible and can be paid by employer, employees, or through a combination of employer/participant dollars. Fees can be collected by payroll deduction on a pre-tax basis.
- Attracting and retaining quality employees is easier with an FSA benefit plan.
Example of Employer Savings
*Insurance premiums averaging $200 per month per employee. **Four employees contributing $2,500 per year. ***Three employees contributing $5,000 per year.
Advantages to the Employee
How Will Employees Save Money?
The portion of salary an employee directs to the FSA plan is not taxed. The employee saves:
- Federal income tax
- State and local taxes
- Social security tax
Employees’ savings will depend on the amount directed to the FSA plan and the employee’s tax rate.
Here’s how they save $$$…
Corporations, partnerships, s-corporations, limited liability companies (LLCs), sole proprietorships, governmental entities, and not-for-profit organizations all save on taxes by establishing an FSA plan. IRS guidelines prohibit sole proprietors, partners, members of an LLC, and 2% or more shareholders of an s-corporation from participating in the FSA plan.
BeneFLEX Keeps Your FSA Plan in Compliance
- BeneFLEX provides an electronic version of your Plan Documents and Summary Plan Description (SPD). A copy of the SPD must be distributed to each plan participant.
- Participants are allowed to change or revoke their medical spending or dependent care election(s) at any time during the plan year if the participant has a change of family status.
- COBRA continuation is offered to all termination participants in the medical reimbursement portion of the plan that have contributed more than they have spent. However, COBRA need not be offered for subsequent plan years.
- If disability insurance is paid on a pre-tax basis, benefits received from the insurance carrier by the employee are taxable. Under most circumstances, it is recommended that disability insurance not be included in the plan.
- No more than $50,000 of employer-sponsored group term life insurance may be provided on a pre-tax basis.
- BeneFLEX provides employers with the information necessary to report amounts paid for dependent care during the calendar year. This amount is reported on the employee’s W-2.
- BeneFLEX tests to ensure the plan does not discriminate in favor of highly compensated employees.
- If you grow your participation in the FSA to over 100 participants, you will need to file the IRS Form 5500 each year. Check with a BeneFLEX account manager for special pricing on this service by our CPA Tax Specialists.
- For a medical FSA, the employer makes the full election available to participants on the first day of the plan. In the case of a deficit in a plan account, the company funds this difference until employee deposits cover the balance. If an employee leaves employment before fully funding the plan, the company completes the funding. BeneFLEX has found employer’s FICA savings outweigh this provision.
- BeneFLEX adjudicates FSA claims to ensure compliance with IRS guidelines.
- BeneFLEX offers the Benny Debit Card, which allows employees to pay for eligible expenses without using out-of-pocket funds. The Benny “smartcard” allows only eligible expenses to be purchased.