Advantage Benefits

Issue: # 88

November 29, 2012

What is a Flexible Spending Account?

Greetings!

December is a hectic time for everyone. We are all keeping an eye on the news with daily stories about the Fiscal Cliff and Healthcare Reform. Any pertinent information we will pass on to you. One of the items recently discussed is about new limitations with Flexible Spending Accounts. Please read below for further details.

Don't forget to take advantage of wellness and fitness reimbursements from your health insurance carrier. Most of those forms can be found in our Advantage Benefits Forms Library.

Thank you for your business and for your referrals.

If you have a question, send an email to Bill or Vanessa today.

Bill Randell CLU,CHFC,

Vanessa Costa CLU,CHFC,

What are limit amounts?

For most of our clients with employees from 10 to 150 we have not seen much demand for FSA's, especially considering the "use it, you lose it" issue. As employers have been forced to select plans with higher co-payments & deductibles, employees now incur greater unreimbursed medical expenses. Itemization of these amount on an individual tax return seldom works because only expenses that exceed 7.5% of AGI is deductible.

Although the limit for an FSA is 2,500 in 2013, click here for IRS Guideline, employees tend to be conservative with their projections for expenses as they fear they will lose it. So, it may make sense to start with $1,040 or $20 per week. This will get employees in the program and then can reevaluate each year. An employer is obligated to pay out the maximum that an employee defers even if they have not deducted the full amount!

Let's review an example:

January 1, company starts FSA with 1,040 maximum for 2013
Employee elects $20 per week
February 2, employee submits $1,040 bill for payment
Employer has to pay the bill

There is a risk to the employer. At the same time, there is a risk to the employee. If submitted bills do not cover the amount that has been deducted, employees forfeit the monies to the employer.

Start conservative at $20 per week and you can always increase to the maximum (2,500 per year) for the next plan year.

Four steps to run an FSA plan

An FSA plan can be adminstered very simply and cost effectively. It can also be done with fancy debit cards, which are convenient, but come with a cost. If you are a business with less than 50 employees you may want to keep costs down. There are four simple steps to install and run your FSA :

We provide the employer with a formal written plan.
An employee makes an election, which can not change to the end of the plan year.
Employer confirms via email once a month all employee deductions. Advantage Benefits will track employee's account balances.
Employer e-mails us claims, which are approved or disapproved. Upon approval, we send authorization to pay and debit the employee's account balance.

Employer saves too!

Since the monies come out pre-tax like a Section 125 deduction, the employer saves on the matching FICA *(7.65%). If your company were to defer 10,000 through your company sponosred FSA, the employer would save $765.

Regular corporations, partnerships, S corporations, Limited Liability companies (LLCs), sole proprietors, professional corporations, and not-for-profits can all save money on taxes by establishing an FSA plan.

While regulations prohibit a sole proprietor, partner, members of an LLC (in most cases), or individuals owning more than 2% of an S corporation from participating in the FSA plan, they may still sponsor a plan and benefit from the savings on payroll taxes.

Short-term Disability Insurance

After health insurance, we feel this is the most important benefit businesses should offer to employees. If you want to review your current plan or set up a plan, let us know. Most of our clients have implemented short term disability with or without an employer contribution and understand the benefits. Now, we are receiving requests for Long Term Disability.

Good video on the basics of disability insurance below.