Flexible Benefit Plans

Flexible Benefit Plans

Flexible Benefit Plans

Flexible Benefit Plans allow eligible employees to pay for certain health care and dependent care expenses with tax-free dollars. This helps your employees save money on taxes for insurance premiums, out-of-pocket healthcare, and/or related child or dependent care expenses. Money deferred into a Flexible Spending Plan is withheld before any taxes are deducted. Federal, State, and Local taxes, including Social Security and Medicare taxes are potentially saved on every dollar contributed to the plan.

Flexible Spending Accounts (FSA)

Even the most comprehensive health insurance plans do not cover everything. Once employees realize how much money they can save by using pre-tax dollars to pay for things they are already buying (medications, co-pays, deductibles), you have their interest. Then, when you show them how easy it is to use those things with a FSA debit card, they can’t wait to enroll!

Employer Advantages

  • FICA tax savings of 7.65% on every dollar the employee contributes to the plan
  • Flexibility in budgeting for and controlling escalating benefit costs
  • Flexibility in benefit choices
  • Employee morale
  • Competitive benefit plan that helps to attract and retain employees

Employee Advantages

  • Tax savings from Federal, State, and FICA
  • Budgeting for medical and chid-care expenses
  • Choice in selecting benefits
  • Morale booster
  • Use pre-tax dollars for out-of-pocket expenses that they are already buying: daycare, insurance premiums, deductibles, co-pays, medication, etc.

Dependent Care FSA (DCFSA)

The DCFSA allows employees to pay dependent care expenses with pre-tax dollars. Married couples filing jointly and singles may elect up to $5,000 annually pre-tax for dependent care which results in significant tax savings for both the employee and the employer. In nearly all cases, the pre-tax deduction through the employer for a DCFSA is double that of the tax credit.

Who is a Qualifying Dependent? 

  • A dependent who was under the age of 13 when the care was provided and for whom the employee may claim an exemption on his/her taxes
  • A spouse who is physically or mentally-challenged
  • A dependent who is physically or mentally-challenged and for whom the employee may claim an exemption (such as an aging parent living with the employee)

Premium Only Plan (POP)

The POP is the most common type of plan and is often used in conjunction with other types of plans (such as an FSA). In a POP, the employee’s portion of group health and other premium is payroll deducted on a pre-tax basis, resulting in lower employee and employer taxes. Group Health, Dental, Vision, and/or Disability Insurance are examples of some of the premiums that can be deducted pre-tax through the POP. Eligible plans are limited to the employer’s group plans in which the employee pays the whole amount, or a portion of. POP plans may help reduce the impact of premium increases.

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