Flex Plans - Flexible Reimbursement Accounts For Tax Savings

Premium Conversion - A Premium Conversion Plan allows an Employer, with the "election" of the Employee, to deduct certain qualified insurance premiums, ie. Heath, Dental, Vision, Critical Illness, Cancer, Limited Benefit Plan contributions from Employee wages. Disability contributions by the Employee may be pre-taxed but the benefit amount paid by the insurer upon the disability of the Employee becomes taxable.

Pre-tax deductions lower the participant's gross income, thus lowering his or her Federal, State, and FICA withholdings. The adjusted gross wages also reduce the Employer's matching Social Security Tax obligation.

Medical Reimbursement Account (MRA) - A Medical Reimbursement Account, also known as as a Health Care FSA (Flexible Spending Account) allows an Employee, upon his or her "election" to set aside wages on a pre-tax basis from part of each pay period for predictable out-of-pocket medical, dental, vision and other qualified medical expenses. Brokers, Employers, and Employees should check with the IRS and/or their TPA for Qualified Reimbursable Expenses.

It should also be noted that funds in the MRA cannot be reimbursed if unused at the end of the "Pan Year" (often known as the "use it or lose it" clause. Brokers, Employers and the selected TPA should provide Employees education at the time of Enrollment to avoid over-estimating qualified expenses.

Dependent Care Reimbursement Accounts (DRA) - A Dependent Care Account allows Employees to set aside part of their wages, upon their "election", on a pre-tax basis to reimbursed eligible expenses incurred for the care of a dependent child, disabled spouse, elderly parent, or other dependent who is physically or mentally incapable of self-care. Employees should compare the savings with the DRA with the savings from the Child Care Tax Credit. The Employee cannot take advantage of both. Generally, if the Employees income is over $24,000 and in a tax-bracket above 15%, the DRA has greater benefit.

    Eligible expenses with the DRA include:

             Day Care fees at qualified facilities
         Local day camp fees
         Baby-Sitting, at-home, for qualified providers

As with the MRA above, the Employer, Broker, and TPA should provide Employee education prior to the Enrollment to avoid confusion.

Transportation Reimbursement Accounts - Section 132 of the IRSC (TRA) - Transportation Reimbursement Accounts allow Employees the opportunity upon "election" to save money using pre-tax dollar for work-related transportation expenses. These include: transit passes, vanpool commuting, and qualified parking. The pre-taxing decreases you taxes while increasing take-home pay.

As with the MRAs and DRAs above, the Employer, Broker, and TPA should provide Employee education prior to the Enrollment to avoid confusion.

BenefitPlace recommends working with qualiflied Brokers, Consultants, TPAs and Organizations experienced with the implementation of the above plans to maximize the the benefits while minimizing any potential risks.