Types[ edit ] Most cafeteria plans offer two major different flexible spending accounts focused on medical and dependent care expenses. Health FSA[ edit ] The most common type of FSA is used to pay for medical and dental expenses not paid for by insurance, usually deductibles, copayments, and coinsurance for the employee's health plan.
Setting up an account is another employee perk that will keep existing staff in the company favor and help attract top talent later. According to Jody L.
Dietel, chief compliance officer of Vista, California-based WageWorks, an independent provider of consumer-directed spending solutions and services, flexible spending accounts are pretty straightforward in their overall goal: At the same time companies save a little on the taxes they pay.
The account, she says, is basically "a tax-advantaged account whereby an employee makes an election up to a maximum dollar amount established by the employer that is available throughout the plan year January 1 to December 31 to pay for out-of-pocket medical, dental, and vision expenses.
Therefore, employees receive the tax savings for incurred expenses and an increase in their spendable income. Employees appreciate the ability to use pretax dollars to fund eligible health, dental and vision expenses not covered by their health plans.
On the other hand, if employees do not use the entire amount they put into the account by the end of the calendar year they risk losing the remaining balance, Dietel notes.
Understanding the Risks and Benefits At first glance it may seem like there are only benefits for the employees. Even though there is no federal or state mandate requiring an employer to offer a flexible spending account, there are advantages for the employer in the form of some payroll and FICA tax savings, explains Jessika Cole, executive vice president for Coldwater, Michigan-based Infinisource, an employee benefits administrator.
One of the biggest risks, Cole says, is not having enough money in the account to comply with the Uniform Coverage Rule. The rule states that on the first day of each year everyone who participates in a FSA is entitled to be reimbursed by the full amount of their annual election, regardless of whether or not the employee's full contribution has been met.
Cole offers this example: On January 2 the employee goes to the eye doctor and gets an exam, contact lenses and glasses.
There is also a risk that the employee could resign before they have contributed their full amount and the company is responsible for the full reimbursement, says Cole.
Vaccaro says these scenarios are not a common occurrence, but still a potential concern. Calling In Support Detailed forms, changing legislation and timely employee communication are just a few of the reasons Cole, Dietel and Vaccaro suggest bringing in a third-party administrator to set up a plan.
Vaccaro says an employers' main concern that should lead them to a third party is employee privacy. She says access to this information could "certainly be problematic, especially since the person doing it may often be the person handling human resources and making decisions for which knowledge of medical conditions could theoretically influence those decisions," says Vaccaro.
Adds Dietel, "Generally, [employers] need to understand the plan rules, which likely means that they should seek the services of a reputable third-party administrator to handle the details.
These are considered self-insured medical plans and so there are some complexities associated with the plans, like the application of HIPAA, how claims should be handled, funding rules and the like. Further, she says, companies must be able to accurately record-keep each participants' individual account as claims are submitted, paid, and denied, must issue reimbursements, and must be able to perform the appropriate discrimination testing applicable to these plans.
How long will you spend doing this yourself? It needs a Plan Document. The Plan Document explains to employees things like how they become eligible, when they can enroll, how and when they can be reimbursed, etc.
Much of what may or may not happen is still "wait and see," says Vaccaro. A few things are clear now, says Cole: Over-the-counter medications without a doctor's note, called a letter of medical necessity, which, in effect "prescribes" employee use, will no longer be allowable expenses.Welcome to TaxSaver Plan.
We are a business that firmly believes in hard work, integrity, compliance and commitment to customer satisfaction. In addition, we take pride in our ability to help companies build and sustain a thriving business. Dependent Care Flexible Spending Account. A Dependent Care Flexible Spending Account can be used to pay for eligible daycare expenses for children age 12 and under or for adult daycare expenses for a disabled spouse or disabled dependent.
Create a more dedicated workforce through streamlined FSA Administration, COBRA Administration, and personalized Benefit Communications. Section Cafeteria Plan.
A Cafeteria Plan (includes Premium Only Plans and Flexible Spending Accounts) is an employee benefits program designed to take . The Financial Services Authority (FSA) today published its Business Plan for /9.
The plan sets out the FSA's programme of work for the year ahead to address the risks highlighted by the. The three basic types of flexible spending accounts are premium-only, medical and dependent care.
Premium-only plans allow employees to deposit funds for medical and life insurance premiums.