HEALTH FSA Plans
A Flexible Spending Account (FSA) is a benefit account, sponsored by an employer, that allows its employees (participants) to put aside money pre-tax, to help pay for eligible healthcare expenses. An FSA is designed to help employees pay for healthcare costs not covered by Employer’s health plan.
Employers can benefit from offering an FSA with lower taxable wages (FICA tax savings), enhanced overall benefits package, and improved employee engagement and satisfaction.
How does an FSA work?
- Employees can make an annual election plan sponsor’s allowed maximum.
- The employee’s annual election is deducted evenly by the employer from the participant’s paychecks. These deductions are taken out tax-free.
- The entire amount of the annual election is available on day 1 of the plan year. The employee does not have to wait to use the full amount.
- Eligible healthcare expenses can be reimbursed by using the WexHealth Debit Card or by check or direct deposit when expenses are paid for out-of-pocket.
DEPENDENT CARE FSA Plans
A Dependent Care FSA (DCA) is similar to a regular FSA, in that it allows employees (participants) to set aside pre-tax funds. These funds will go towards paying for qualified dependent care expenses. Most will use this program to pay for child daycare and/or after-school care expenses. However it can also be used to pay for adult daycare expenses as well. It serves as an alternative to using the Dependent Care Tax Credit.
How it Works
- Employees may contribute up to $5,000 to a DC FSA if they file their taxes as a single or married jointly.
- Employees may contribute up to $2,500 to a DC FSA if they are married but file their taxes separately.
- Employers may contribute to a DC FSA, but employer contributions count toward the limits.
- DC FSA limits do not adjust for inflation.
- The annual election will be divided by the number of pay periods in the plan year. That amount is then deducted from your paycheck each pay period.
- The amount of your payroll deduction is deposited into your DCA and is available as it is deposited. Not the full amount like an FSA.
- Funds must be used by your employer’s claims filing deadline or they will be forfeited. Unused funds will not rolled over to the next plan year.
A health savings account is a tax-advantaged medical savings account available to taxpayers in the United States who are enrolled in a high-deductible health plan.(HDHP) The funds contributed to an account are not subject to federal income tax at the time of deposit and can be used tax-free.
Why would an employer offer an HSA?
An HSA has great advantages for the Employer and the Participants. Employers benefit from lower reported wages (FICA tax savings), an enhanced employee benefits package, and improved employee satisfaction. Employees benefit from increased take-home pay (lower taxable income) and savings on qualified healthcare expenses.
How it Works
- For current year 2020, Participants are authorized to make a total deduction from their paycheck of $3,500 for individual HDHP coverage, or $7,000 for family HDHP coverage.
- The Employer deducts the amount elected by the participant, per pay-period, and tax free (or before taxes are taken out). Participants can also contribute after-tax money (up to the maximum allowed) and file those amounts as a deduction on their annual tax returns.
- Eligible Purchases can be made directly from your HSA account, either by using your WexHealth Benefits card, or pay out-of-pocket and then reimburse yourself from your HSA.
- The interest on HSA funds grows on a tax-free basis. Also, interest earned on an HSA is not considered taxable income when the funds are used for eligible medical expenses.
A health reimbursement arrangement (HRA) sometimes called a Health Reimbursement Account, is an IRS-approved, employer-funded, tax-advantaged health benefit used to reimburse employees for out-of-pocket medical expenses and personal health insurance premiums.
An HRA is not health insurance. Instead, employers offer employees a monthly allowance of tax-free money. Employees then buy the health care services they want, potentially including health insurance, and the employer reimburses them up to their allowance amount.
Why would an employer offer an HRA?
An HRA offers certain advantages to employers and employees. By choosing a high deductible health insurance plan, the employer is able to reduce premium payments and save money. The HRA is then established to cover the difference between the former deductible and the new high deductible amount. Ultimately, by coupling an HRA with a high deductible health insurance plan, employers are able to reduce their health care costs in a way that keeps employees happy and places no extra financial burden upon the employees.
How it Works
Because HRAs vary in plan design it is best to review the plan documents or contact us for your specific plan details. In general though, eligible employee would simply submit a claim for reimbursement along with an explanation of benefits from their health insurance carrier showing that they had incurred an eligible expense. The employer would then fund the reimbursement of the expense and we would process the reimbursement payment.
Because HRAs all vary in plan design it is best to review the plan documents or contact us for your specific plan details. Most times the employer will define the services eligible for reimbursement from an HRA based on a list of IRS approved eligible expenses. Typically, an employer will reimburse healthcare services like doctor’s office visits and hospital services, and prescription drugs.
The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) provides a way for individuals and their families to continue group health benefits provided by their group health plan under circumstances such as voluntary or involuntary job loss, reduced work hours, transition between jobs, death, divorce, and other life events.
Covered employers are required to ensure all employees are notified of their rights under COBRA. Failure to comply with all aspects of COBRA may result in legal implications and financial penalties. IRS penalties include fines of $100 a day, per beneficiary, for noncompliance.
Why Benefit Systems?
Administering COBRA in compliance with federal mandates requires an enormous investment in time, energy and resources. Our COBRA administration and compliance solution combines expert customer service with the best technology the market offers, allowing us to bring employers and COBRA participants a compliant and easy to use process. We will take on this time-consuming task for you.
What We Offer:
- An expert service team offering a personalized experience for employers and participants
- Administration of all required notifications, billings, and collections as regulated and enforced by the DOL and the IRS
- Takeover of all existing COBRA participants
- Open enrollment administration for COBRA participants
- Premium Collection: we offer participants a variety of payment methods ranging from checks to credit card to recurring ACH