AGENDA

2. AGENDA • A Flexible Spending Account (FSA) overview • How it works • Health Care FSA • Optional Debit Card • Limited Health Care FSA • Dependent Care FSA • Important planning information • Submitting claims for reimbursement • 2010 Open Enrollment information • Resources The University of Arizona – Human Resources

3. FLEXIBLE SPENDING ACCOUNT OVERVIEW • Employer-sponsored plan • Pay less taxes • Increase your take-home pay • Estimate annual out-of-pocket medical and dependent care expenses • Pre-tax payroll deductions deposited into the Flexible Spending Account • Use these dollars for reimbursement of qualified out-of-pocket expenses The University of Arizona – Human Resources

4. HEALTH CARE FSA OVERVIEW • Reimbursement for qualified health care expenses • Qualified expenses defined by the IRS • IRS Pub. 502 www.irs.gov/pub/irs-pdf/p502.pdf • ASI website www.asiflex.com • Includes: Medical, dental, prescription, vision, hearing, and over-the-counter medications (under certain circumstances) The University of Arizona – Human Resources

5. HEALTH CARE FSA PROCESS • Estimate annual out-of-pocket expenses not covered by insurance • No minimum contribution per paycheck • $5,000 maximum annual contribution • Enroll in Flexible Spending Account in November • Incur eligible out-of-pocket expenses in 2010 • Receive reimbursement The University of Arizona – Human Resources

6. Office visit co-pay Health care deductible Prescription co-pay Orthodontia expenses Prescription eyeglass and contact lenses Acupuncture Blood pressure monitor Hearing aids Over-the-counter medications (purchased to treat an existing or imminent medical condition) Allergy, cold, cough, flu, nasal, sinus Diabetic supplies Denture adhesive Sleeping aids Pain relievers, aspirin and non-aspirin HEALTH CARE FSA SAMPLE EXPENSES A complete listing can be found on ASI’s website at www.asiflex.com Employees enrolled in the Health Savings Account Option eligible for reimbursement of expenses related to dental, vision, preventive care only (Limited Health Care FSA) The University of Arizona – Human Resources

7. LIMITED HEALTH CARE FSA • Reimbursement for dental, vision and preventive care expenses only • Dental Care: Cleanings, Fillings, Crowns, Orthodontics, Denture Care Products • Vision Care: Contact lenses, Eyeglasses, LASIK, Contact Lens Solution • Preventive: Out-of-Network Co-pays and Prescriptions • You must be enrolled in the Health Savings Account Option to be eligible for the Limited Health Care FSA The University of Arizona – Human Resources

8. HEALTH CARE FSA W. & W. WILDCAT EXPERIENCE* Without FSA With FSA Annual Salary $30,000 $30,000 Office visits $ 150 Prescription co-pays $ 500 Dental deductibles $ 100 Prescription glasses/contacts $ 600 Over-the-counter medication $ 150 Total out of pocket expenses $1,500 Pre-tax deduction 0 1,500 Taxable Income $30,000 $28,500 Federal Income Tax 1,507 1,345 State Income Tax 347 309 Social Security (FICA) Tax 2,2862,162 Total taxes 4,140 3,816 Net paycheck $25,860 $24,684 After-tax expenses 1,500 0 Actual take-home pay $24,360 $24,684 *Sample uses married with two exemptions; savings varies depending on employee’s tax situation Visit http://asiflex.com/Calculator/Tax-Savings-Calculator.htm to determine your tax savings $324 Annual savings The University of Arizona – Human Resources

9. HEALTH CARE FSA W. & W. WILDCAT EXPERIENCE* Without FSA With FSA Annual Salary $60,000 $60,000 Office visits $ 150 Prescription co-pays $ 500 Dental deductibles $ 100 Prescription glasses/contacts $ 600 Over-the-counter medication $ 150 Total out of pocket expenses $1,500 Pre-tax deduction 0 1,500 Taxable Income $60,000 $58,500 Federal Income Tax 5,976 5,734 State Income Tax 1,375 1,319 Social Security (FICA) Tax 4,572 4,448 Total taxes 11,923 11,501 Net paycheck $48,077 $46,999 After-tax expenses 1,500 0 Actual take-home pay $46,577 $46,999 Visit http://asiflex.com/Calculator/Tax-Savings-Calculator.htm to determine your tax savings *Sample uses married with two exemptions; savings varies depending on employee’s tax situation $422 Annual savings The University of Arizona – Human Resources

10. HEALTH CARE FSA OPTIONAL DEBIT CARD • NEW: Optional debit card to pay for eligible health care expenses • For Health Care FSA only – not available with Limited Health Care FSA • Can only be used at: • Health care providers based upon the Merchant Category Code • Retail merchants using an Inventory Information Approval System • Wal-Mart, Target, Costco, Safeway, Walgreens, CVS • Complete list at www.asiflex.com/debitcards The University of Arizona – Human Resources

11. HEALTH CARE FSA OPTIONAL DEBIT CARD The debit card reduces but does not eliminate paperwork • Every transaction must be substantiated • Some substantiation can be done electronically • All other purchases will require follow-up documentation requested by ASI • Always keep your documentation even if ASI does not ask for it The University of Arizona – Human Resources

12. HEALTH CARE FSA OPTIONAL DEBIT CARD • Purchases are electronically substantiated when they: • Match a co-payment • Match any combination of co-payments up to 5 times the highest amount for the type of expense based on the member’s health plan • Occur at a store with the Inventory Information Approval System • Are recurring expenses and are substantiated once via paper claim • All other purchases require follow-up documentation The University of Arizona – Human Resources

13. HEALTH CARE FSA OPTIONAL DEBIT CARD How to obtain a debit card: • An application for the debit card will be mailed to your home address • Cost: $1/month • Entire annual fee will be deducted from your Health Care FSA account election at the time you elect the card • Return application to ASI The University of Arizona – Human Resources

14. DEPENDENT CARE FSA OVERVIEW • Reimbursement for qualified dependent care expenses that are • necessary to allow you to work or look for work • necessary to allow your spouse to work, look for work, or be a full-time student • Child care and adult daily care expenses, not dependent medical expenses • $5000 maximum contribution The University of Arizona – Human Resources

15. DEPENDENT CARE FSA SAMPLE EXPENSES • Must provide over half of dependent’s support • Care for child under age 13 • Child care • Nanny service • Preschool • Must have custody more than 50 percent of the year • Care for a “qualifying relative” age 13 and over • Unable to care for self, shares residence, income less than Federal exemption amount • Expenses may be paid to a relative (child, parent or grandparent of participant) IF • caregiver is not under age 19 • caregiver is not a tax dependent of the participant IRS Publication 503: Child and Dependent Care Expenses www.irs.gov/pub/irs-pdf/p503.pdf The University of Arizona – Human Resources

16. DEPENDENT CARE FSA CONSIDERATIONS • Special considerations for UA Child Care Voucher Program, Sick Child Program and Emergency/Back-Up Care Program participants • Employee out of pocket expenses and University contributions for these three pre-tax programs are included in the $5,000 annual maximum • Consult your professional tax advisor • Contact UA Life & Work Connections, at 621-4365 or visit http://lifework.arizona.edu/cc/ The University of Arizona – Human Resources

17. DEPENDENT CARE FSA W. & W. WILDCAT EXPERIENCE* Without FSA With FSA Annual Salary $30,000 $30,000 Total dependent care expense $5,000 Pre-tax deduction 0 5,000 Taxable Income $30,000 $25,000 Federal Income Tax 1,507 966 State Income Tax 347 222 Social Security (FICA) Tax 2,2861,872 Total taxes 4,140 3,060 Net paycheck $25,860 $21,940 After tax expenses 5,000 0 Actual take-home pay $20,860 $21,940 Sample uses married with two exemptions; savings varies depending on employee’s tax situation Visit http://asiflex.com/Calculator/Tax-Savings-Calculator.htm to determine your tax savings $1,080 Annual savings The University of Arizona – Human Resources

18. DEPENDENT CARE REIMBURSEMENT ACCOUNT W. & W. WILDCAT EXPERIENCE* Without FSA With FSA Annual Salary $60,000 $60,000 Total dependent care expense $5,000 Pre-tax deduction 0 5,000 Taxable Income $60,000 $55,000 Federal Income Tax 5,976 5,165 State Income Tax 1,375 1,188 Social Security (FICA) Tax 4,5724,158 Total taxes 11,923 10,511 Net paycheck $48,077 $44,489 After tax expenses 5,000 0 Actual take-home pay $43,077 $44,489 Sample uses married with two exemptions; savings varies depending on employee’s tax situation Visit http://asiflex.com/Calculator/Tax-Savings-Calculator.htm to determine your tax savings $1,412 Annual savings The University of Arizona – Human Resources

19. FSA PROCESS • Estimate annual out-of-pocket expenses • Incur eligible out-of-pocket expenses in 2010 • Submit a claim to ASI by mail, fax or email or use debit card • claim forms available at www.ASIFlex.com • use EmplID • Reimbursement by: • check mailed to your home • direct deposit to a checking or savings account • You can receive e-mail letting you know when a reimbursement has come through • Submit claims through April 30, 2011 The University of Arizona – Human Resources

20. IMPORTANT PLANNING INFORMATION • Use care when estimating expenses • Consider debit card cost (optional) • Be conservative • Review, consider current year expenses • Do you anticipate similar expenses for 2010? • Use the worksheet • Track expenses in 2010 for enrollment in 2011 The University of Arizona – Human Resources

21. WHO IS ASI? • Third party administrator • Answers questions about this plan • Receives, reviews and approves claims • Submit claims with your EmplID • Sends reimbursement directly to you through • Direct deposit • Check mailed to your home address • (800) 659-3035 • www.asiflex.com The University of Arizona – Human Resources

22. 2010 OPEN ENROLLMENT • November 2 – 30, 2009 • Effective January 1, 2010 through December 31, 2010 • Enroll using UAccess Employee http://uaccess.arizona.edu • Current participants must re-enroll to ensure participation in 2010 The University of Arizona – Human Resources

23. RESOURCES … • HR website (plan information) • www.hr.arizona.edu • UAccess (to enroll) • http://uaccess.arizona.edu • ASI (claims information) • www.asiflex.com • IRS Pub. 502 (medical/dental care) • www.irs.gov/pub/irs-pdf/p502.pdf • IRS Pub. 503 (dependent care) • www.irs.gov/pub/irs-pdf/p503.pdf The University of Arizona – Human Resources