FLEX
Both employers and employees have felt the effects of rising health care costs. Consumers also enjoy having control over health care choices. These trends have led to the offering of Flexible Benefit plans that allow for tax savings and consumer choice.
FLEXIBLE SPENDING ACCOUNT (FSA)
Employee contributes tax-free payroll deductions to Health FSA to pay for eligible medical, dental, vision, pharmacy, and over-the-counter items. In addition, a Dependent Care FSA allows reimbursement of eligible childcare expenses such as daycare.
An employer must offer a Qualified High Deductible Plan (QHDHP) to allow contributions to an HSA. Both employee and employer contributions are allowed and generally offer a tax savings. Funds are held by an HSA trustee and can be used to pay for eligible medical, dental, vision, pharmacy, and over-the-counter items.
LIFESTYLE SPENDING ACCOUNT (LSA)
Employer funds a spending account that employees can use for their individual needs such as gym memberships, food delivery services, office supplies, and more. LSAs are an after-tax benefit that reduce limitations set by an FSA.
Tax advantaged method to pay premiums for group, medical, dental, and vision.
HEALTH REIMBURSEMENT ARRANGEMENT (HRA)
Employer funds a part of the employee's medical expenses. Many employers increase the medical plan deductible to secure a lower premium and then pair the medical plan with an HRA. For example, the employer might move from a $500 deductible to a $1,000 deductible and offer the HRA to pay for the last $500 of an employee's medical deductible.
INDIVIDUAL COVERAGE HEALTH REIMBURSEMENT ARRANGEMENT (ICHRA)
Employers of all sizes can offer the Individual Coverage HRA (ICHRA). Group health insurance can also be offered, but not to the same class of employees that are offered the ICHRA. For example, the business can offer full-time employees group health and part-time employees an ICHRA, but they cannot offer full-time employees a choice between group health insurance and the ICHRA.
QUALIFIED SMALL EMPLOYER HEALTH REIMBURSEMENT ARRANGEMENT (QSEHRA)
Employers with fewer than 50 employees can offer the Qualified Small Employer HRA (QSEHRA). Other group health insurance cannot also be offered.
In addition to reimbursements via check or direct deposit, we offer a debit card that can be used at approved merchants according to the plan design.
The IRS requires plans that allow pre-tax benefits to be tested each plan year to ensure that the plan is not discriminating against employees.
ERISA specifies claims and appeals language that must be included as part of any welfare benefit plan. A Wrap plan places that language in one document as well as allows the employer to file one Form 5500 for the wrapped plans instead of one Form 5500 for each plan.
Welfare benefit plans such as medical, dental, vision, life, disability, accidental death and dismemberment plans must file a Form 5500 within seven months of the end of the plan year. This requirement is for plans with 100 or more employees participating as of the first day of the plan year.
EMPLOYER TAX SAVINGS
Providing Flexible Benefits Accounts for your employees can save your company tax dollars!-
FICA matching of 7.65% of pre-tax payroll deducted contributions
Deduction of any employer contributions
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Deduction of claim reimbursements
EMPLOYEE TAX SAVINGS
Employees can also save tax money with Flexible Benefits Accounts!-
FICA of 7.65% of pre-tax payroll deducted contributions
Reduced federal, state, local income taxes
Eligible disbursements are not taxed
In addition, HSA earnings grow tax free and after age 65 non-medical withdrawals not hit with 20% penalty but included in income, like traditional IRA
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Eligible disbursements are not taxed
COMPARISON OF PLANS
| Health FSA | Dependent Care FSA | HRA | HSA | |
|---|---|---|---|---|
| Eligibility | Employees of any size company. Sole proprietors, partners, and shareholders greater than 2% ownership of S corporations are excluded. | Employees of any size company. Sole proprietors, partners, and shareholders greater than 2% ownership of S corporations are excluded. | Employees of any size company. Sole proprietors, partners, and shareholders greater than 2% ownership of S corporations are excluded. | Individuals covered under a Qualified High Deductible Health Plan who are not entitled to Medicare and not claimed as dependent. |
| Ownership | Employer | Employer | Employer | Employee |
| Portability | No | No | No | Yes |
| Funding/contribution | Employer and/or employee but usually only employee | Employer and/or employee but usually only employee | Employer, but only at time of claim payment | Employer and/or employee |
| Rollover | Yes - if designed up to $610 (2023) | No | Yes – if designed | Yes |
| Limits | Determined in plan document - up to $3050 (2023) | $5000 for married $2500 for married filing separately. Cannot exceed income of lowest paid spouse. | Determined in plan document. Usually plan deductible. | Individual - $3850 (2023) Family - $7750 (2023) |
| Eligible expenses | -Medical expenses incurred in plan year for employee, spouse, or dependent not covered under other plan. See section 213(d). -Certain OTC drugs | -Care for children under 13, handicapped children, or adult dependents that allows spouse to work | -Determined by plan document but usually medical expenses incurred in plan year for employee, spouse, or dependent not covered under other plan. See section 213(d). -Some insurance premiums -Certain OTC drugs | -Medical expenses incurred after HSA established for employee, spouse, or dependent not covered under other plan. See section 213(d). -Some insurance premiums -Certain OTC drugs |
| Non-eligible expenses | Not allowed | Not allowed | Not allowed | Allowed but distribution subject to income taxes and 20% penalty. After age 65 subject only to income tax. |
| Employer tax advantages | -Deduct employer contribution -Save 7.65% FICA on employee contribution | -Deduct employer contribution -Save 7.65% FICA on employee contribution | Deduct claim reimbursements | -Deduct employer contribution -Save 7.65% FICA on employee contribution |
| Employee tax advantages | -Contributions are pre-tax -Eligible disbursements are not taxed | -Contributions are pre-tax -Eligible disbursements are not taxed | -Eligible disbursements are not taxed | -Contributions are pre-tax -Eligible disbursements are not taxed -Account earnings tax free |
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