FSA – Flexible Spending Account
Is a Flexible Spending Account (FSA) right for your organization?
Employer-sponsored Flexible Spending Accounts (FSAs) are benefit plan arrangements that allow employees to pay for certain health care, dependent care and/or transportation expenses. Employees set aside pre-tax dollars to pay for certain types of expenses. There are three types of FSAs: Medical (FSA), Dependent Care Account (DCA), and Commuter Reimbursement Account (CRA).
Flexible Spending Accounts offer significant tax advantages to both employers and employees alike. FSAs also allow employers to offer a low-cost benefit that is targeted to meet employee needs in critical benefit areas, including out-of pocket medical expenses, child care and in some cases transportation.
Experience the IntegraFlex difference. Let us help you:
- Determine savings arrangements that help offset out-of-pocket medical expenses
- Empower your employees to be informed and responsible healthcare consumers
- Enjoy the flexibility to design a plan that works best for your company and its employees
DCA – Dependent Care Account
A Dependent Care Account (DCA) is designed to benefit employees with young dependent children or disabled dependents of any age.
Section 129 of the Internal Revenue Code provides for dependent care assistance plans (DCAPs). A DCAP is an employer-sponsored benefit plan that allows employees to pay for certain dependent care expenses on a tax-free basis, up to a specified limit. Typical DCAP expenses include babysitting and day care costs while the employee and his or her spouse are working.
CRA – Commuter Reimbursement Account
A Commuter Reimbursement Account allows you to use before-tax dollars to pay parking and commuter costs. You can deduct up to $250 per month for parking costs or up to a maximum of $250 per month for mass transit or van pooling costs. There is a $255 limit for combining mass transit and vanpooling.
This plan allows for remaining funds to roll over to the next year if you re-enroll in the new plan year however, not all employers allow this. Please confirm with your employer. If you do not re-enroll, you will have a run-out period to request reimbursement for commuter expenses incurred during the plan year. Any funds remaining in the account at the end of the run-out period will be forfeited to your employer. You must submit your request for reimbursement within 180 days from the date on which the expense is paid, not to exceed the plan’s run-out period.
- Van Pool – Any highway vehicle that seats at least six adults (not including the driver). In addition, at least 80% of the vehicle mileage will be for transporting employees between home and work, with employees occupying at least one-half of the vehicle’s seats (not including the driver). Maximum amount is $250 per month. If a participant enrolls in both the Mass Transit and Vanpooling accounts, the total combined deduction per month is $255.
- Mass transit – The cost of transit passes (includes any pass, token, fare card or voucher) for mass transportation to and from work. Qualified amounts include costs of any pass, token, fare card, voucher, or other item that entitles the employee to use mass transit for the purpose of traveling to or from her/his place of work. Maximum amount is $250 per month. If a participant enrolls in both the Mass Transit and Vanpooling accounts, the total combined deduction per month is $255.
- Parking – For parking at or near your primary work location; the location where you take mass transit; or the location where you pick up the van pool. Fuel, maintenance, and insurance costs are not covered. Maximum amount is $250 per month.
- An FSA saves employees money by reducing income taxes. The contributions made by employees are deducted before paying federal, state or social security taxes.
- Employees who incur frequent medical expenses can plan ahead and save money in the long-term by using pre-tax dollars to pay for the expense.
- Employers owe no payroll taxes on employee FSA contributions.
- Because employees’ gross incomes are reduced, employers can see an average payroll tax savings of 9.7 percent.
- FSAs also allow employers to offer a low-cost benefit that is targeted to meet employee needs in critical benefit areas.