Flexible Spending Accounts

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Flexible Spending Account (FSA). Pre-Tax savings through:Health FSA: To pay for qualified out-of-pocket medical expensesDependent Care FSA: To pay for qualified child or adult daycare expenses. Flexible Spending Account Highlights. Money you're already spendingContributions set aside from your

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Flexible Spending Accounts

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1. Flexible Spending Accounts GP 48462-2 | 03/2007 This presentation is approved: As is For use with an employer or employee audience Any changes made must be reviewed by Advertising Compliance before use. Flexible Spending Accounts from Principal Life Insurance CompanyGP 48462-2 | 03/2007 This presentation is approved: As is For use with an employer or employee audience Any changes made must be reviewed by Advertising Compliance before use. Flexible Spending Accounts from Principal Life Insurance Company

2. Flexible Spending Account (FSA) Pre-Tax savings through: Health FSA: To pay for qualified out-of-pocket medical expenses Dependent Care FSA: To pay for qualified child or adult daycare expenses There are two accounts available; health care and dependent care. The Health Care Flexible Spending Account allows you to set aside funds each year to pay out-of-pocket medical expenses not paid by insurance coverage. The Dependent Care Account allows you to set aside funds to pay for child or adult day care. There are two accounts available; health care and dependent care. The Health Care Flexible Spending Account allows you to set aside funds each year to pay out-of-pocket medical expenses not paid by insurance coverage. The Dependent Care Account allows you to set aside funds to pay for child or adult day care.

3. Flexible Spending Account Highlights Money you’re already spending Contributions set aside from your pay before taxes are figured Reduces the amount of your income subject to state, federal and social security taxes This is money you’re already spending, and now you can spend it tax free! Your contributions will be set aside from your pay before taxes are figured, thereby reducing the amount of your income subject to state, federal and social security taxes. Note: Tax and savings results vary. To determine if an FSA is right for you, consult your own independent tax advisor. This is money you’re already spending, and now you can spend it tax free! Your contributions will be set aside from your pay before taxes are figured, thereby reducing the amount of your income subject to state, federal and social security taxes. Note: Tax and savings results vary. To determine if an FSA is right for you, consult your own independent tax advisor.

4. Example of Potential Tax Savings Sherri and Jim Martin expect to spend $3,000 for daycare during the plan year. They decide to use the Dependent Care Flexible Spending Account offered by Sherri’s employer. Let’s review an example of the potential tax savings… Sherrie and Jim Martin expect to spend three-thousand dollars for daycare in the upcoming year. They decide to use the Dependent Care FSA offered by Sherrie’s employer.Let’s review an example of the potential tax savings… Sherrie and Jim Martin expect to spend three-thousand dollars for daycare in the upcoming year. They decide to use the Dependent Care FSA offered by Sherrie’s employer.

5. Example of Tax Savings This year, Sherrie expects to earn thirty thousand dollars. She will set aside three-thousand dollars from her pay into a Dependent Care Flexible Spending Account, before taxes are figured. Her taxable income is reduced to twenty-seven thousand dollars. She estimates she’ll need to pay federal, state and social security taxes of twenty-seven point sixty-five percent or seven thousand four hundred sixty-six dollars. That leaves her with a spendable income of nineteen thousand five hundred thirty-four dollars after she pays taxes and daycare. If she doesn’t use her employer’s flexible spending account, she ends up paying more in taxes and has a spendable income of only eighteen thousand seven hundred and five dollars. By using the Dependent care FSA, she saved eight hundred and twenty-nine dollars.This year, Sherrie expects to earn thirty thousand dollars. She will set aside three-thousand dollars from her pay into a Dependent Care Flexible Spending Account, before taxes are figured. Her taxable income is reduced to twenty-seven thousand dollars. She estimates she’ll need to pay federal, state and social security taxes of twenty-seven point sixty-five percent or seven thousand four hundred sixty-six dollars. That leaves her with a spendable income of nineteen thousand five hundred thirty-four dollars after she pays taxes and daycare. If she doesn’t use her employer’s flexible spending account, she ends up paying more in taxes and has a spendable income of only eighteen thousand seven hundred and five dollars. By using the Dependent care FSA, she saved eight hundred and twenty-nine dollars.

6. When can you enroll in an FSA? During your Open Enrollment Period Deadline for enrollment – 4:30 p.m. on April 30 Send forms to Human Resources You can sign up for the program during the open enrollment period or within a number of days specified by your employer, after your hire date.You can sign up for the program during the open enrollment period or within a number of days specified by your employer, after your hire date.

7. When can you change your election? Once enrolled, your election can’t be changed until the following plan year, unless you have a family status change, such as: Marriage or divorce Death of a spouse or a dependent Birth or adoption of a child Spouse becomes employed or terminated You or your spouse change job status You or your spouse take a leave of absence Once you’ve enrolled, you won’t be able to make any changes until next year’s open enrollment period unless you have a family status change. Those changes include, but aren’t limited to: marriage, divorce, death of a spouse or dependent, birth or adoption of a child, your spouse either becomes employed or is terminated from a job, either you or your spouse change from full-time to part-time or vice versa, or you or your spouse take a leave of absence. Once you’ve enrolled, you won’t be able to make any changes until next year’s open enrollment period unless you have a family status change. Those changes include, but aren’t limited to: marriage, divorce, death of a spouse or dependent, birth or adoption of a child, your spouse either becomes employed or is terminated from a job, either you or your spouse change from full-time to part-time or vice versa, or you or your spouse take a leave of absence.

8. Health FSA Deductibles, coinsurance and/or copayments Physical exams Prescription drugs Dental expenses (including orthodontia) Vision expenses (glasses, contacts, seeing eye dogs) Hearing expenses (hearing aids, exams) Orthopedic expenses Counseling Travel for medical treatment Over-the-counter drugs (to alleviate or treat an illness or injury) Let’s look first at the Health Care Flexible Spending account and the benefits it can provide you. This account is used for reimbursement of expenses not covered by your medical, dental or vision coverage, such as: Deductibles/copays Coinsurance Physical exams Dental (including ortho) Vision expenses Hearing expenses and more If you have questions about whether an expense can be reimbursed, you can contact the Principal Life Insurance Company service center that processes your claims.Let’s look first at the Health Care Flexible Spending account and the benefits it can provide you. This account is used for reimbursement of expenses not covered by your medical, dental or vision coverage, such as: Deductibles/copays Coinsurance Physical exams Dental (including ortho) Vision expenses Hearing expenses and more If you have questions about whether an expense can be reimbursed, you can contact the Principal Life Insurance Company service center that processes your claims.

9. Health FSA You decide how much to deposit in your Health FSA, up to the maximum allowed. Amount will be deducted from your pay before taxes are figured and deposited into your flexible spending account You can use your account for expenses, not to exceed your total annual election amount, anytime during the plan year Health Care minimum - $120 Health Care maximum - $4200 (eff. 6/1/09) You can decide how much to deposit in your Health Care FSA, up to the maximum allowed. Then, each pay period before taxes are figured, the appropriate amount of contribution will be set aside from your pay and deposited into your account. You can use the account for expenses, not to exceed your total annual election amount, at anytime during the plan year.You can decide how much to deposit in your Health Care FSA, up to the maximum allowed. Then, each pay period before taxes are figured, the appropriate amount of contribution will be set aside from your pay and deposited into your account. You can use the account for expenses, not to exceed your total annual election amount, at anytime during the plan year.

10. Reimbursement Example You choose to deposit $40 into your Health FSA each month. In July, you have $300 in out-of-pocket expenses. When filing for reimbursement, you would be eligible for the entire $300 immediately, because you are scheduled to contribute more than $300 during the plan year. For example, let’s say you choose to deposit forty dollars into your Health Care FSA each month during the year. That’s four hundred eighty dollars a year. In July, you have three hundred dollars in out-of-pocket expenses. When filing for your reimbursement, you would receive the entire three hundred dollars immediately, since you are scheduled to contribute more than three hundred dollars during the year. For example, let’s say you choose to deposit forty dollars into your Health Care FSA each month during the year. That’s four hundred eighty dollars a year. In July, you have three hundred dollars in out-of-pocket expenses. When filing for your reimbursement, you would receive the entire three hundred dollars immediately, since you are scheduled to contribute more than three hundred dollars during the year.

11. Reimbursement Example As your $40 a month contributions continue to be set aside, the negative balance of $220 will decrease. Since you’ve already spent $300, only $180 will be available for claims the rest of the plan year. As your forty dollar a month contributions continue to be set aside in the account, the negative balance of two hundred twenty dollars will decrease. Since you have already spent three hundred dollars of the money you planned to set aside, only one hundred eighty dollars will be available for claims for the rest of the year.As your forty dollar a month contributions continue to be set aside in the account, the negative balance of two hundred twenty dollars will decrease. Since you have already spent three hundred dollars of the money you planned to set aside, only one hundred eighty dollars will be available for claims for the rest of the year.

12. Dependent Care FSA Reimburses expenses for child care or adult care. Children under age 13 Other physically or mentally incapable dependents (including adult day care) Care must permit you and your spouse to work or attend school full-time Must include caregiver’s name, dates of service and amount paid to receive reimbursement Now let’s view the Dependent Care Flexible Spending Account. This can be used for reimbursement of expenses for care of children under age 13 and other dependents who are physically or mentally incapable of self-care. The care must be given in order to allow you and your spouse to work or attend school full-time. You must provide proper documentation to receive a reimbursement -- cancelled checks cannot be used as receipts. Now let’s view the Dependent Care Flexible Spending Account. This can be used for reimbursement of expenses for care of children under age 13 and other dependents who are physically or mentally incapable of self-care. The care must be given in order to allow you and your spouse to work or attend school full-time. You must provide proper documentation to receive a reimbursement -- cancelled checks cannot be used as receipts.

13. Dependent Care FSA Once again, you decide how much to deposit in your Dependent Care FSA, up to the maximum allowed. Unlike the Health FSA, you can only submit claims on the money currently in your account. Dependent Care minimum - $300 Dependent Care maximum - $5000 Like the health care account, you can decide how much to deposit in your Dependent Care FSA, up to the maximum allowed. The appropriate amount of contribution will be set aside from you check before taxes and deposited into your account each pay period. With the dependent care account, you can only make claims on the money currently in your account.Like the health care account, you can decide how much to deposit in your Dependent Care FSA, up to the maximum allowed. The appropriate amount of contribution will be set aside from you check before taxes and deposited into your account each pay period. With the dependent care account, you can only make claims on the money currently in your account.

14. Reimbursement Example You decide to set aside $300 a month, for a total of $3600 for the plan year. At the end of June you submit a claim for $400, but there is only $300 in your account. Here’s an example that illustrates how this works… You decide to set aside three hundred dollars a month in your dependent care account. That would be a total of thirty-six hundred dollars a year. At the end of January you submit a claim for four hundred dollars in dependent care expenses. Since there’s only three hundred dollars in your account, you would be reimbursed for three hundred dollars in expenses. You’ll be reimbursed for the remaining one hundred dollars in expenses, on the next reimbursement.Here’s an example that illustrates how this works… You decide to set aside three hundred dollars a month in your dependent care account. That would be a total of thirty-six hundred dollars a year. At the end of January you submit a claim for four hundred dollars in dependent care expenses. Since there’s only three hundred dollars in your account, you would be reimbursed for three hundred dollars in expenses. You’ll be reimbursed for the remaining one hundred dollars in expenses, on the next reimbursement.

15. How to Get a Reimbursement For Health: Submit itemized bill or statement Employee Request for Reimbursement form Reimbursements are issued weekly on Tuesday. $25 minimum reimbursement Requests can be faxed, emailed or mailed. Note: You don’t have to pay outstanding health care expenses in order to be reimbursed. You only need to have received the services during the plan year. Now that you have an idea of what kinds of expenses you can claim for these accounts, let’s talk a little about how to get a reimbursement. For health care - submit an itemized bill or statement and a completed request for reimbursement form to your Service Center of The Principal. Then on your scheduled reimbursement date, a check will be cut and sent to you for the claims you submitted. You don’t have to pay outstanding health care expenses in order to be reimbursed. You only need to have received the services during the plan year.Now that you have an idea of what kinds of expenses you can claim for these accounts, let’s talk a little about how to get a reimbursement. For health care - submit an itemized bill or statement and a completed request for reimbursement form to your Service Center of The Principal. Then on your scheduled reimbursement date, a check will be cut and sent to you for the claims you submitted. You don’t have to pay outstanding health care expenses in order to be reimbursed. You only need to have received the services during the plan year.

16. Reimbursement of OTC Drugs Over-the-counter drug expense reimbursement requires an itemized receipt that includes: Name of the provider Name of product purchased Cost of the item Date it was purchased. We will not be able to reimburse the participant for an OTC drug expense that is missing any of the information above. The documentation necessary to reimburse an OTC drug expense will be similar to that requested for all other types of health care FSA expenses. We will require an itemized receipt that includes the name of the provider, the name of the product purchased, the cost of the item, and the date it was purchased. If a cash register receipt from the provider includes all the information listed above, it will be considered acceptable documentation. If the cash register receipt does not include all that information, and (for example) is missing the name of the provider, the date, or just lists OTC and an amount, rather than the actual name of the OTC drug, we will not be able to reimburse the participant for that OTC drug. The documentation necessary to reimburse an OTC drug expense will be similar to that requested for all other types of health care FSA expenses. We will require an itemized receipt that includes the name of the provider, the name of the product purchased, the cost of the item, and the date it was purchased. If a cash register receipt from the provider includes all the information listed above, it will be considered acceptable documentation. If the cash register receipt does not include all that information, and (for example) is missing the name of the provider, the date, or just lists OTC and an amount, rather than the actual name of the OTC drug, we will not be able to reimburse the participant for that OTC drug.

17. How to Get a Reimbursement For Dependent Care: You’ll need a written statement from the provider showing: Dates of service Amount of expenses That you’ve paid for those services Send statement, along with a completed Request for Reimbursement. Requests can be faxed, emailed or mailed. Reimbursements are issued weekly on Tuesday. $25 minimum reimbursement For dependent care, you’ll need a written statement from your provider detailing the dates and the amount of the expenses, and show that you’ve paid for those services. Send the statement, along with a completed request reimbursement form to your Principal Life service center.For dependent care, you’ll need a written statement from your provider detailing the dates and the amount of the expenses, and show that you’ve paid for those services. Send the statement, along with a completed request reimbursement form to your Principal Life service center.

18. Other Things to Consider... Health and Dependent Care FSA: Unused dollars are forfeited Health and dependent care accounts are separate Tax implications Refer to your enrollment materials for more detailed information on our FSAs and how to enroll Visit www.principal.com/fsa to review covered and excluded charges and access our FSA calculator A few other things to consider… Be sure that you put no more into either of these accounts than you expect to spend during the year. Any unused dollars left at the end of the plan year are NOT refundable. Each spending account is separate and you can enroll in one or both. If you enroll in both, please be aware that dollars CAN NOT be shifted between accounts. When you contribute to the dependent care spending account, the amount you can claim as a tax credit on your tax return can be reduced or eliminated. Consult your tax advisor to see what is best for your situation. Your enrollment materials give you more detailed information on the two accounts and how to enroll. Also, visit www.principal.com. Flexible Spending Accounts may save you money! Be sure to consult your independent tax advisor to determine if an FSA is right for you.A few other things to consider… Be sure that you put no more into either of these accounts than you expect to spend during the year. Any unused dollars left at the end of the plan year are NOT refundable. Each spending account is separate and you can enroll in one or both. If you enroll in both, please be aware that dollars CAN NOT be shifted between accounts. When you contribute to the dependent care spending account, the amount you can claim as a tax credit on your tax return can be reduced or eliminated. Consult your tax advisor to see what is best for your situation. Your enrollment materials give you more detailed information on the two accounts and how to enroll. Also, visit www.principal.com. Flexible Spending Accounts may save you money! Be sure to consult your independent tax advisor to determine if an FSA is right for you.

19. Provides convenient access to your pre-tax dollars at qualified merchants that accept MasterCard® and offer eligible products or services for reimbursement. Pay for eligible expenses directly at the point of service. Avoid paying cash for services, filling out and submitting a claim form and waiting for a reimbursement check. Debit Card Note: This slide is optional. It should only be used if the employer has elected debit cards. Debit cards allow you easy access to the pre-tax dollars at qualified merchants, health and day care providers that accept MasterCard® and offer eligible products or services for reimbursement. You directly pay for eligible expenses at the point of service. You avoid the traditional hassles of paying cash for services, filling out and submitting a claim form or waiting for a reimbursement check.Note: This slide is optional. It should only be used if the employer has elected debit cards. Debit cards allow you easy access to the pre-tax dollars at qualified merchants, health and day care providers that accept MasterCard® and offer eligible products or services for reimbursement. You directly pay for eligible expenses at the point of service. You avoid the traditional hassles of paying cash for services, filling out and submitting a claim form or waiting for a reimbursement check.

20. Debit Card – Need to Know The card can not be used at the super market, discount store and pharmacy that does not have an IIAS. Inventory Information Approval System – store data base that tracks items by SKU number and whether it is a FSA eligible item. The IIAS will only allow the card to pay for the eligible FSA items Ineligible items must be paid by another means; such as cash or personal bank card.

21. Debit Card – Need to Know The card can be used at your doctor, dental or vision clinic. It may also be used for mail-order drugs and/or online drug stores. Dependent Care only participants – no card available

22. Debit Card – 2009 Merchants Pharmaceutical Preparations In-Vitro and N-Vitro Diagnostics Optical Instruments and Lenses Orthopedic and Prosthetic Appliances Eyeglasses and Eye Safety Shields Ambulance Services Dental/Lab/Medical/Ophthalmic Hospital Equip & Supp Ophthalmic Supplies Hearing Aids Orthopedic Goods, Prosthetic Devices Doctors NEC Dentists, Orthodontists Osteopathic Physicians

23. Debit Card – 2009 Merchants Chiropractors Optometrists, Ophthalmologists Opticians, Optical Goods & Eyeglasses Optical Goods and Eyeglasses Chiropodists, Podiatrists Hospitals Psychiatric Hospitals Specialty Hospitals, except Psychiatric Medical and Dental Laboratories Dental Laboratories Specialty Outpatient Facilities, NEC Medical Services & Health Practitioners, NEC

24. Debit Card Save ALL RECEIPTS, as Principal Life audits your account throughout the plan year. You are responsible for adhering to requests from Principal Life in regards to submitting further documentation for substantiation purposes. Do not throw your card away once you’ve used your current plan year balance. It is good for three years and will be updated with your new election at renewal. Note: this slide is optional. It should only be used if the employer has elected debit cards. Debit cards are not completely paperless, but they are less paper. When using your debit card, Save ALL RECEIPTS as Principal Life will be auditing your account throughout the plan year. It is your responsibility to adhere to the requests from Principal Life in regards to submitting further documentation for substantiation purposes. Do not throw your card away once you’ve used your current plan year balance. It is good for three years and will be updated with your new election amount at renewal.Note: this slide is optional. It should only be used if the employer has elected debit cards. Debit cards are not completely paperless, but they are less paper. When using your debit card, Save ALL RECEIPTS as Principal Life will be auditing your account throughout the plan year. It is your responsibility to adhere to the requests from Principal Life in regards to submitting further documentation for substantiation purposes. Do not throw your card away once you’ve used your current plan year balance. It is good for three years and will be updated with your new election amount at renewal.

25. Questions? This presentation is an overview of the FSA being offered by your employer. FSA contributions can impact your federal and state taxes and Social Security benefits. This publication is intended to provide accurate and authoritative information in regard to the subject matter covered. The accuracy of the information is not guaranteed and is provided with the understanding that The Principal is not rendering legal, accounting, or tax advice. While this communications may be used to promote or market a transaction or an idea that is discussed in the publication, it is not a marketing opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements.

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