Flexible Spending Account Plan
Flexible Spending Accounts allow your employees to reimburse themselves tax-free for certain expenses:
- Healthcare expenses not covered by your group health insurance plan.
- Qualified Medical Expenses
- Work-related expenses for dependent care of children under 13, as well as the care for certain other dependents.
- Allows reimbursement for work related, dependent care expenses of children under the age of 13, as well as the care of certain other dependents.
- Employees may be reimbursed for charges by a licensed daycare center, as well as charges for a caregiver in an employee's home. Caregivers cannot be:
- An Employee's Spouse
- An Employee's child under the age of 19
- Anyone who can be claimed as an Employee's dependent
- Estimate Dependent Care Expenses
When employees participate in a Flexible Spending Account:
- They contribute pre-tax dollars in advance to an account in their name. You as the employer hold the employee's contributions until the money is requested by Midwest Group Benefits.
- Later, when they have eligible expenses, they can be reimbursed from their account. Employees may submit for reimbursement as often as they like. Claims are processed in our office weekly.
- Click here to complete or print a Flexible Spending Claim Form.
- Employees may withdraw the total amount of their Medical Spending account election at any time during the plan year once they have incurred reimbursable expenses
- For the Dependent Care Account employees can only be reimbursed for amount that they have contributed to date.
- The general calculation for tax savings is to multiply the amount of money an employee will redirect by their tax rate. Here is an example:
Who Can Sponsor a Flexible Spending Account Plan?
Regular corporations, partnerships, S corporations, limited liability companies (LLCs), sole proprietors, professional corporations and not-for-profits can all save money on payroll taxes by establishing a Flexible Spending Account. 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 plan, they may still sponsor a plan and benefit from the savings on payroll taxes.
The IRS
- There are several 'rules' the IRS has implemented for Section 125 participants that you should be aware of:
- Plan Year. Only expenses incurred during the plan year are reimbursable (though payment of these expenses can be carried over for a short time.)
- Separate Accounts. Un-reimbursed medical expenses and dependent care expenses are treated as separate accounts. The IRS does not allow employees to transfer money between those accounts.
- Family Status Changes. Once you make your decisions on how much you redirect into your spending accounts, this cannot change… except for changes in your family status which include: Marriage, divorce, death of a spouse or child, birth or adoption of a child, or change in your spouse's employment status from full-time to part-time or vise versa.
- Forfeiture of Unused Balance. If expenses you incur for the Plan Year are less than your contributions for that same Plan Year, you will forfeit the unused balance. With wise and conservative planning most participants do not forfeit any money.
Contact Us Today
Setting up a Flexible Spending Account Plan is an easy and cost effective way to enhance your employees benefits program.
Request a Proposal and see how easy it is for you and your employees to save tax dollars!
