Before an employer can take advantage of benefit tax
deductions for insurance premiums, out-of-pocket medical
expenses, dependent/adult daycare, and parking and
transit expenses, the IRS and Department of Labor require employers to
establish a formal Plan Document.
A Healthcare Flexible Spending Account (FSA) is a
reimbursement account that allows an employee to set
aside money for healthcare costs from their paycheck
before taxes are taken out. The advantage is that
employees are spending pretax dollars, so they end
up paying fewer taxes on their salary and having
more to spend. With an FSA, employees can be
reimbursed for dollars spent on eligible healthcare
expenses that are not paid for by their health
insurance plan.
If employees don't use the money by the end of the
benefit plan year, their employer can't refund it to
them. But the amount of money they risk forfeiting
from their FSA at the end of the benefit plan year
is small compared to the substantial
savings-especially now that employees can spend FSA
dollars on over-the-counter medicines that they use
every day.
A Dependent Care FSA allows an employee to be
reimbursed on a pre-tax basis for childcare or adult
dependent care expenses for qualified dependents
that are necessary to allow the employee or their
spouse to work, look for work, or attend school
full-time.
A Dependent Care FSA can be used to reimburse
employees with pre-tax dollars if the expenses for
dependents meet the IRS definition of dependent for
income tax purposes. An adult (e.g., parent,
grandparent, adult disabled child) may qualify as a
dependent if the employee is providing more than
half of that person's maintenance for the year.
Dependent care FSAs limit the annual maximum
allotment by law to $5,000 per year, $2,500, if
married filing a separate return. If an employee is
currently receiving a childcare subsidy, they must
ensure that the total amount they elect through the
FSA combined with the total amount of the childcare
subsidy they receive does not exceed the $5,000
limit. If married, the $5,000 limit must be observed
by the employee and their spouse where both
individuals have access to an FSA and/or a childcare
subsidy.
Section 125 Premium Only Plans or POP allow
employers to reduce payroll taxes by making one
simple adjustment to the payroll process. Under a
Section 125 Premium Only Plan employees elect to pay
their portion of health insurance premiums on a
pre-tax or tax-free basis rather than on an
after-tax basis. This creates savings for both the
employee and the employer.
By helping to defray the high cost of adopting a
child, an adoption assistance plan gives an employer
the opportunity to boost employee morale and help
establish greater equality between the benefits
provided to adoptive families and families with
biological children. The federal tax code allows an
exclusion from federal income taxes for employer
payments and reimbursements of adoption expenses
made under an adoption assistance plan -- but only
if the plan and the benefits meet certain specific
requirements. In addition, adoptive parents may
qualify for a tax credit for their adoption
expenses.
A Health Reimbursement Arrangement (HRA) is an
instrument offered in conjunction with a
high-deductible health plan, and is funded by the
employer for each participating employee. It pays
for eligible health care expenses typically covered
under the medical plan. Unused funds can be carried
over to the next year to cover future health care
expenses, an incentive to employees to use their
personal HRA wisely. If funds are exhausted, the
employee is responsible for satisfying the remaining
deductible before the plan begins to pay. If the
employee changes jobs, the money stays with the
employer.
PowerFlex HFSA Plan Document Pricing.
