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The basics of all Flexible Spending Account plans is the pre-tax premium feature. Employers
establish these plans so that employees have the opportunity to deduct their group insurance premiums prior to
taxes. Employers save the matching FICA costs and employees save their FICA federal and state taxes, at least 30%,
on all monies. Employers with as few as 5 employees can set up these plans with minimal costs. There are a few
basic rules, but your plan should at least be in writing and a form has to be filed each year with the IRS.
Flexible Spending Accounts- Download a Summary
The following options are usually offered in FSAs.
These Flex plans allow employees and employers to set aside additional pre-tax money to pay for certain expenses.
Healthcare Account
- This plan allows employees to reduce their salary to pay for expenses
not covered by their insurance such as co-pays, eye glasses, contact lenses, crowns, root canals, deductibles,
and co-insurance. If you can deduct it off your federal return, except for insurance premiums, you can put it through
this plan without regard to the 7.5% of adjusted gross income rule.
- Expenses may be reimbursed for family members if they file a joint tax
return even if they are not on the health plan
- Employees must elect annual amounts to be set aside and they are withheld
in equal increments
- FlexAmerica's weekly claim processing reduces the waiting period for
reimbursement
- Reimbursements are made up to the maximum that has been elected for
the year.
- Provides greater tax savings for all employees since most people do
not qualify for the federal deduction
- Provides a benefit for all employees, even those not participating in
the company sponsored medical &/or dental plan(s).
- Employers and employees save taxes
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Dependent Care Account
- Allows employees to pay for qualified dependent care expenses without
taxes being withheld
- This works in conjunction with the federal tax credit,
- Allows a maximum of $5,000 to be set aside compared to the federal child
care tax credit which is based on a maximum of $3,000 for 1 child and $6,000 for 2 children
- Employers and employees save taxes
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Premium Reimbursement Account
- Option for employees with individual health insurance policies to set
aside money in additional account similar to the dependent care account to pay premiums with pre-tax dollars
- Employees cannot go into a negative balance
- The premiums must be for an individual policy billed to the employee,
not COBRA or other group plan
- Employers and employees save taxes
