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Medical Insurance
Flexible Spending Accounts
FSA Plans in Oregon
Employer Sponsored Health Care Spending AccountA Flexible Spending Account or FSA is an account established by an employer that allows employees to contribute a portion of their salary each month, income tax-free, for the purpose of paying for health care expenses and any portion of health insurance premiums they may be responsible for. It is not available for self-employed individuals or individual employees on their own. It is sometimes referred to as a Section 125 plan after the IRC section number.
Categories of Eligible Expenses
- That portion of an employee's health insurance premiums paid for by the employee each month
- Health care related expenses that are not reimbursed by the group health insurance plan.
- Dependent day care expenses for children
- Other health related premiums paid by the employee such as vision overage, dental insurance, a supplemental disability or accident policy offered through the employer.
Plan May Be Established as a Premium Only Plan
A Premium Only Plan (POP) can be established for categories 1 and 4 above.
Annual Election and Dollar Commitment with a Use-It-Or-Lose-It Provision
At the annual plan renewal date, each employee must decide whether he or she wants to participate in the plan for the coming year. An employee who decides to participate must also decide how much is to be withheld from his or her paycheck each month. This, at best, is an educated guess as to how much of the deductible and coinsurance amounts might be required, what other qualifying expenses such as dental and vision will be used, and what dependent day care costs will be. This amount cannot be changed during the year except for certain qualifying events. Any funds left in an employees' account 2 1/2 months after the end of the year are lost and belong to the employer. The employer can only use those funds for the benefit of all employees.
Employers Save on Payroll Taxes by Reducing Taxable Payroll
An employer reduces his payroll for payroll tax purposes by the amount of employee contributions to the plan. This savings on FICA and FUTA taxes amounts to a 7.65% savings. The employer would reduce their tax bill by $76.50 for each $1000 contributed to the plan by his employees.
Employers Must Meet Two Tests on a Yearly Basis
An employer must meet the Key Employee Concentration Test and the Highly Compensated Employee Average Benefit Test on a yearly basis. This is designed to prevent excessively benefiting a select few. A Third Party Administrator (TPA) usually handles these details.
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Pacific Benefit Consultants, Inc. 450 Country Club Rd. Suite 330 Eugene, Oregon 97401 (541) 484-6624 (541) 484-4245 (Fax) (800) 588-8688 (Toll Free) |