Flex Benefits
Elle
113 Posts
Does anyone have experience working with a Flexible Benefits Plan? If so, has it really been beneficial for the ee and er?
Any input on this would be greatly appreciated. Thanks.
Any input on this would be greatly appreciated. Thanks.
Comments
It's very beneficial for the employee since the amount they allocate to flexible spending is pre-tax and we have a maximum of $5,000 for both medical and dependent care. It's extremely beneficial for co-pays, Rx, and many out of pocket expenses. The IRS now allows all non-prescription medications. Which means aspirin, cough syrup, zantac, etc. all can be used towards the flex spending account. It's amazing how many items are allowed.
The draw back is that an employee can draw against their account even if they don't have the total amount of money in the account. It would be imperative that the employer stipulate in an agreement with the employees that any negative balance in the flex account will be reimbursed by the employee to the employer upon termination of employment (usually by deducting from the final paycheck).
We have not had this problem in all the years I've been doing this.
Hope this was helpful.
What if an ee does not use all the money in their account?
The arrangement we've made is a use it or lose it. But, the upside is that OTC meds are approved...among other things that could be purchased at the end of the year to use up any remaining balance.
Usually the TPA will notifiy the ee approx. 90 days prior to year end of their remaining balance. It is up to the ee to submit the receipts to be reimbursed back to them.
We have had no problems with our FSA program.
Unless something has changed with this program.
Can an employee pick how much money they want deducted?
What I'm trying to figure out is if it benefits us as an employer as well.
Also, our plan is use it or lose it, BUT at the end of the year we take the money not used to offset the negative balances of ees who have terminated employment, then any money left over is divided equally among the participants and given back in the next plan year to active employees as of Dec. 31. This is our 2nd year of the Flex Plan, so we returned $22.04 back to our employees.
The benefit to the employees is they lower their income taxes and pay for medical/rx services with before tax money. The only draw back that I see for the employee is that their Social Security wages are lowered by their election amount, which ultimately will affect their Social Security check when they do retire IF they are continuously putting money in a flex plan.
The benefits to the Employer are they don't have to pay the matching Social Security/Medicare taxes, so the Employer is saving the 7.65% on all amounts that are withheld for the employees flex plan. Also, employees who use the plan will appreciate it.
This 7.65% savings more than pays for the TPA fees charged us to administer the plan.
It is DEFINITELY a worthwhile program.
James Sokolowski
HRhero.com
I'm no accountant, but I suppose for the employer it's a good-will program plus some savings on FICA plus a minor amount of 'seized funds' at program-year end. I'll defer to Mark on this.
Our third party administrator loves to tell the story about the CEO who set their ceiling at something around $10,000 then left the company. By the way, their are some weird Cobra rules that allowed each of his dependents to claim the $10,000 of medical. In the case of this story, everyone mysteriously had that many expenses subsequent to the CEO leaving - which of course, soaked the ex-company. It is stories like these that led us to the relatively small limit of $1,500.