A solid business financial plan starts with an FSA.

1. A SOLID BUSINESS FINANCIAL PLAN
starts with an FSA
Budgeting and saving are two basic
ingredients to a good financial plan.
What is often overlooked during
these financial discussions is an
employer-provided benefit:
FLEXIBLE SPENDING ACCOUNTS (FSAs)
This is not only a
goodfinancial plan
for employees, but
also employers.
An FSA allows employees to use
pretax dollars to fund eligible
health care related expenses
not covered by a health plan.
Let’s look at the reasons to start an FSA:
A participant’s unused
amount in excess of $500 (or
a lower amount specified in
the plan) that remains unused as of the end
of the plan year (i.e., the end of the plan year
run-out period) is forfeited. Forfeited
amounts may defray an employer’s
reasonable administrative expenses.
USE-or-LOSE Rule
The IRS recently announced the
option to allow Health FSA
participants to have up to a
$500 carryover of any unused amount to the
next plan year if the employer amends its
plan to allow the carryover.
Carryover
If the plan does not utilize a
carryover, employers can give their
employees longer than 12 months to spend
down their FSA balances. A properly drafted
plan document can allow an additional two
months and 15 days for participants to incur
medical expenses and be reimbursed.
Grace period
FSA contributions are not
subject to FICA or FUTA taxes.
Consequently, the more employees
contribute, the more employers save.
Save employers money
FSA contributions are tax-free
and therefore are not subject
to FICA, federal (and most
state) income tax withholding.
Distributions are tax-free also.
Save employees money
Employers have plenty of
Health FSA design options:
general purpose, limited
purpose, deductible-only, seed
or matching contributions.
Flexible
Rising health care costs often mean higher
deductibles and non-covered expenses.
Health FSAs fill the void for employees.
Out-of-pocket
expenses
Generally, an overspent Health FSA is not
subject to COBRA. Health FSA COBRA coverage
only lasts through the end of the current
plan year.
Health FSAs are not
always subject to COBRA
Because of the Affordable Care Act
(ACA), participants can cover their
adult children on a Health FSA until the year
in which the children turn age 27.
Cover adult children
Dependent care expenses are usually a fixed
cost that easily exceed the $5,000 FSA limit
in a year, even for just one child. The
Dependent Care FSA limit is $2,500 if the
employee is married but filing spearately.
Tax-free reimbursement makes a lot of sense.
Dependent care
expenses
These make it even easier as
auto-substantiation rates for Health FSAs are
usually over 90 percent, virtually eliminating
the hassle of submitting receipts and
waiting for reimbursement.
Debit cards
Employees will save money on many items
typically not covered under insurance plans
including orthodontia, prescribed
over-the-counter drugs, and even some
medical items such as bandages.
Employees Save on
Health Care Purchases
copyright 2013