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Issue: # 17 May 16, 2008
78 pleasant
Greetings!
 
Keeping you informed of the latest developments in the employee benefit marketplace. 
If you have any questions, e-mail Bill or Vanessa.  To learn more about Advantage Benefits, click here.     Many of our clients have found these newsletters to be quite helpful and we have now set up a link to hold all the archived newsletters on-line that can be accessed at anytime. 
 
If you know anyone, who may find this information of interest, please forward them this newsletter (there is a link on the bottom), and they can subscribe themselves.  
 
Sincerely,
 

Bill Randell, CLU, CHFC             Vanessa Costa, CLU,CHFC
Advantage Benefits Group, Inc. 
HSA's. FSA's, HRA's - What's Best for Our Company?
 
Review of these items can be every confusing and which concept is best depends on many criteria.  We have focused several of our last emails on Health Savings Account (HSA's) and  announced that our own Group Health Plan, for Advantage Benefits Group,  just enrolled in the HSA's for May 1.  We are discussing the HSA's with more of our clients and under the right circumstances it will be a viable option. 
 
Today's newsletter will highlight the Flexible Spending Accounts (FSA's).  Although this program has been around for quite some time, many small businesses have not taken advantage of them for a variety of reasons.  Since the overall climate of health insurance continues with double digit increases and higher co-payments, let's take a brief look at the FSA's again.  
 
 
Flexible Spending Accounts
The Basics 

As employee co-payments continue to rise, it is not uncommon for employees to pay $500 per year in out-of-pocket expenses.   At year end, if the employee itemizes they may only  deduct un-reimbursed medical expenses above & beyond 7.5% of adjusted gross income.  A Flexible Spending Account enables employees to defer monies tax-deductible for un-reimbursed medical expenses via the convenience of payroll deduction. 

Here are the basics, if you want to learn more send us an e-mail today.  
 

Limit

 

Employer sets an annual limit.   We suggest a conservative limit at first; for example, $500 since there is risk/exposure to the employer.

 

 

Employee Deduction

 

Once the employee chooses his election for the year, it can not be changed until next year.  Obviously they can not defer more monies then the annual limit allowed by the employer.

 

 

Plan Year

 

FSA plan years are the calendar year (Jan-Dec).  First year can be a short plan year; for example, if you started the plan June 1st, the first plan year would be 7 months (June-December).

 

 

Employer Risk/Exposure

 

Assume there is a $500 maximum limitation and an employee elects to defer monies over the plan year to achieve the maximum.   Day 1, this employee will have $500 available to pay for un-reimbursed medical expenses.   As a result, there is the potential for an employee to spend the $500 and quit the company before they actually contribute $500. 

 

  

 

Eligible Expenses

 
We have found the Website FSA and You to be the best website for any questions you may have including a listing of eligible expenses.
 
Claims

Assuming you administer the plan professionally, with an outside TPA, you will provide a Debit Card for all employees to present to providers for expenses.  Every business day, you receive an e-mail showing the usage on the debit card by employees & these monies are deducted from the corporate checking account.   Here is an example:

 
 

�        Employee contributes money weekly to arrive at the max. of $500.  

�        Employee uses their debit card to pay for $30 prescription.  

�        The debit card balance is now reduced to $470.

�        The employer will receive a report showing the $30 and it will be deducted from the employer checking account.

 

 

Employer Costs

 

Monthly: $8 per month per employee participating in the FSA.

Annual:   $100 plus $5 per employee participating in the FSA

 

 

Employee Savings

 

All monies deferred into an FSA are free of Federal, State and FICA taxes.   In essence the FSA enables an employee to pay their un-reimbursed medical expenses tax deductible through the FSA.

 

 

Employer Savings

 

Employer saves on the matching FICA payments (7.65%).  Although there are some monthly and annual expenses for the FSA plan, the employer FICA savings typically cover the cost of the plan. 

 

 

Use it Or Lose It

 

Employees must spend the monies in their FSA or they lose it.  You can not roll the monies over.   Since an employee can not change their deduction they must be careful when choosing their amount. 

 

  

TPA

 

We do not do this ourselves, we refer people to Choice Care Card.

 

 

S-Corporation Shareholders

 

Subchapter S Corporation shareholders, above the 2% level, may not participate in the FSA, but they may sponsor a plan for their employees.  We, however, are not accountants so please refer any tax questions to your CPA.