What is the difference between a Premium Only Plan and a Flexible Benefit Plan?
A Premium Only Plan (POP) is a basic type of FSA that offers the benefit of paying for employer-sponsored group insurance premiums on a pre-tax basis. A POP plan requires a simple payroll modification to deduct elected premium amounts before any payroll taxes are computed. A Flexible Benefit Plan offers the same benefit as a POP plan, but also includes the advantage of paying for unreimbursed health expenses and dependent care expenses on a pre-tax basis.
How do my employees benefit from a FSA?
Money that your employees redirect into a FSA is exempt from federal income tax, Social Security (FICA), state and local government taxes. This tax savings results in a significant increase in your employees’ spend able income.
How does the company benefit from a FSA?
FSAs save your employees significant money on taxes and other related employee expenses. In addition, FSAs provide for a significant employee benefit without employer contributions and reduce the employer's payroll-related costs (e.g., social security or FICA taxes and workers’ compensation premiums). The company could save up to 10% on these two items alone! In addition the plan will improve employee benefits cost control, reduce the financial impact on employees when premium costs are shifted to the employee, improve employee morale and help to attract and retain high quality employees.
What type of insurance premiums can be paid for through the plan?
Health, dental, vision insurance and various voluntary products. Disability insurance and group-term life insurance (up to $50,000 death benefit) offered by the employer may be paid for through a FSA. However, long-term care may not be paid for through the plan.
How many employees does a company need to make a FSA cost effective?
It’s not the total number of employees who participate, but the number of dollars that are put through the FSA that determines its cost effectiveness for any given client.
Does a FSA have to be set up on a calendar year basis?
No. Your FSA can be set up for any 12-month period you choose. This is referred to as a “plan year.” Actually, many employers prefer to set up the plan year for their FSA so that it corresponds with open enrollment for their health benefits plan.
Is administration difficult?
CONEXIS provides turnkey FSA services to our clients, leaving very little for your employees to do. Your designated company representative simply needs to forward your plan participants’ payroll deductions to CONEXIS each pay period, and advise us of any changes, new hires, and leaves-of-absence. CONEXIS does the rest.
What happens to any money that's left over at the end of the plan year?
Can it be rolled over?
IRS regulations stipulate that money redirected into a flexible spending account in any plan year be used to reimburse qualified expenses incurred during that plan year. At the end of the plan year, any money left over in a participant’s account is forfeited to the employer and used to offset administrative costs or expenses related to the plan. This is sometimes referred to as the “use it or lose it rule.” When your employees are properly educated about the plan and guided toward a conservative annual election amount, the risk of forfeiture is greatly reduced and the tax benefits they receive will be well appreciated.
OK, I’m convinced…I want to start a FSA at my company. What’s the best way to explain it to my employees?
CONEXIS can provide as much guidance for enrolling your employees into the FSA as your company requires. We offer the availability of communication materials (such as payroll stuffers, posters, and sample letters) and employee group meetings. To obtain a quote for these services, please contact our service team at (877)CONEXIS (266-3947) Ext. 4650. We can also be reached by e-mail at sales@conexis.com
What is discrimination testing?
Pursuant to the Internal Revenue Code, FSAs cannot discriminate in favor of highly compensated or key employees. Under certain conditions, the non-discrimination requirements of a FSA may limit eligibility for participation. Therefore, as part of our setup fee, CONEXIS will perform an initial discrimination test for your company.
What are your fees?
Our fees are very competitive. In fact, most employers will save a significant amount in taxes even after paying the cost of setup and administration! Pricing is based on the number of employees at your company.
