Flexible Spending

Plans

Flexible Spending Plans, Also Known As…

• Cafeteria Plans

• Section 125 Plans

• FSA Plans

• Health Flexible Spending Arrangements (FSAs)

• Dependent Care Assistant Plan (DCAPs)

Types of Cafeteria Plans

Health Flexible Spending Arrangement• A health flexible spending arrangement is an

individual account funded by employee salary reduction on a pre-tax basis.

• Amounts placed in such an account are used exclusively to reimburse the employee for qualified unreimbursed medical expenses incurred by the employee, spouse and/or dependents during the plan year.

Health Flexible Spending Arrangement

• Elected funds are available on first day of plan. (You can receive the full amount of elected funds prior to full payroll deduction for the plan year.)

• A dependent care assistant plan is an individual account funded by employee salary reduction on a pre-tax basis.

• Amounts placed in such an account are used exclusively to reimburse the employee for employment-related dependent care that would be eligible for the dependent care tax credit with the IRS.

Dependent Care Assistant Plan

• Funds are available as funds are withdrawn from payroll check. (You can only take out what you have put in to date from your payroll deductions.)

Dependent Care Assistant Plan

Examples of Qualified FSA Expenses

•Medical, dental & vision expenses not covered under any other plan.

•Co-payments and deductibles that you are responsible for under your primary medical, dental or vision plan or under any other medical, dental or vision plan.

Examples of Qualified FSA Expenses

• Prescription drug co-payments as well as most over-the-counter medications such as antacids, cold medicines, pain relievers, and allergy medication

• Eye exams, eyeglasses, contact lenses & other vision expenses (i.e., Lasik eye surgery)

• Orthodontic expenses

• And the list goes on…

Examples of Non-qualifying FSA Expenses• Dietary Supplements, toiletries, cosmetics and

sundry items (even if prescribed by a physician)

• Health insurance premiums that you or your spouse pays for coverage under another health plan.

• Health club dues

• Bottled water

Examples of Non-qualifying FSA Expenses

• Cosmetic surgery

• Vitamins, herbal supplements, Retin-A, Rogaine

• Maternity clothing, diaper service or diapers

• Travel expenses, meals and lodging

Qualifying DCAP Expenses & Requirements

• Expenses are incurred for the care of a qualifying dependent so you (and your spouse, if applicable) can work or look for work.

Qualifying DCAP Expenses & Requirements

• The person being cared for is your dependent as defined by federal tax laws.

• The person who provided the care is not your spouse or a person whom you claim as a tax dependent.

• No Income Tax

• No FICA or FUTA Tax

• State and Local Taxes (if applicable)

• Benefits purchased with pre-taxed dollars in lieu of after-tax dollars

Advantages for Employee

John Doe has twin daughters. The twins are going to be getting braces on next year so he enrolls in the Flexible Benefits Plan. He elects to have $1,200 come out of his paycheck on a pre-tax basis. John earns $35,000 and his wife (a stay-at-home mom) earns no income. They file a joint return.

The following chart will illustrate the tax savings for John Doe is approximately $362.00.

Example of Tax Savings

Example of Tax Savingsw/ Cafeteria Plan w/o Cafeteria Plan

1. Adjusted Gross Income $35,000 $35,000

2. FSA Election $ 1,200 $ 0

3. W-2 Gross Wages

$33,800 $35,000

4. Standard Deduction ($ 7,600) ($ 7,600)

5. Exemptions ($ 11,600) ($ 11,600)

6. Taxable Income $14,600 $15,800

Example of Tax Savingsw/ Cafeteria Plan w/o Cafeteria Plan

7. W-2 Gross Wages $33,800 $35,000

8. Federal Income Tax (Taxable income x tax schedule)

($7,605) ($7,875)

9. FICA Tax (7.65% of W-2 gross wages)

($ 2,586) ($ 2,678)

10. After-tax Expenditures $ 0 ($ 1,200)

11. Take-home Pay $23,609 $23,247

• Irrevocability of Election (unless Qualifying Change of Status occurs)

• Use-It-or-Lose-It Rule (no roll-over)

Disadvantages for Employee

• DCAP vs. Tax Credit ($30,000 combined income - tax credit may be more beneficial than DCAP)

• Social Security offsets (may adversely affect calculation of Social Security and other benefits at time of entitlement)

Disadvantages for Employee

• Change in your legal marital status

• Change in the number of your tax dependents

• Change in employment status of employee or spouse (must affect eligibility)

Examples of Change in Status

• Your tax dependent satisfies (or ceases to satisfy) an eligibility requirement for a particular benefit plan

• Change in residency (must affect eligibility)

• Change in day care providers

Examples of Change in Status

Substantiation of FSA Claims

•A bill or receipt from a physician, dentist, pharmacy, or other supplier which includes the following information

– Date of Service– Name of Patient– Provider Name & Address– Type of Service– Amount patient is responsible

for paying

Substantiation of FSA Claims

•An Explanation of Benefits (EOB) statement indicating the deductible, co-insurance and amounts not covered by any medical, dental and/or vision plan under which the employee or any eligible dependent are covered.

Substantiation of FSA Claims

•Store receipts are acceptable ONLY for hearing aid batteries, contact solution and eligible over-the-counter medications. The receipt must have the following information printed on the receipt:

– Store Name– Date of Purchase– Product Name– Amount of Product

Substantiation of DCAP Claims

•A bill or receipt from a child care provider which includes the following information:

– Date(s) of Service– Name of Dependent– Child Care Provider name,

address and phone number– Amount or Charge– Tax ID Number or Social

Security Number of provider

Unacceptable Substantiation of FSA & DCAP Claims

•Cancelled checks and credit/debit card receipts are NOT acceptable forms of claims substantiation. No reimbursements will be made on these types of receipts unless it is accompanied by one of the above required documentation.

Frequently Asked Questions

What is the frequency of reimbursements?Bi-Weekly.

Do you have automatic deposit capabilities?No. A reimbursement

check is issued and mailed directly to the employee.

Frequently Asked Questions

Do I have to pay for the services prior to getting reimbursement?

No. A participant only has to prove that the services were incurred. You do not have to prove that you paid for the services.

Frequently Asked Questions

What are your customer service hours?Monday through Friday, 8:30 a.m. to 5:00 p.m. Eastern Standard Time.

Do you offer a toll-free customer service #?Yes, the toll free number is 800-297-1829. This number as well as our address and fax number is indicated on all the reimbursement forms.

Frequently Asked Questions

Will you accept fax claims?Yes, as long as all the required information needed is sent and the fax is legible. Our fax # is 740-522-7483.

Frequently Asked Questions

Will we have access to our FSA claim information on line?

Yes, by logging onto www.medben.com and entering the “online services” This will allow you to view your paid and pending claims as well as check on a claim or payment status.

Questions