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- Without an FSA, out-of-pocket medical expenses that exceed 7.5% of
an individual's gross income are tax deductible
- With an FSA (authorized under IRC section 125), money can be deducted
from an individual's paycheck on a pretax basis to cover all
out-of-pocket medical expenses, even if those expenses do not reach
7.5% of gross income
- With an FSA, both federal income tax and social security taxes are
avoided on amounts deposited to the FSA
- Since lower Social Security taxes are paid, individuals may have very
slightly lower Social Security retirement income
- This plan is similar to the Dependent Care Plan used to pay daycare
expenses
- Copays, deductibles and uninsured out-of-pocket payments for medical,
dental and vision expenses are eligible
- Examples of covered expenses include; office visit copays, deductibles,
prescriptions, orthodontics, glasses and contacts, laser eye surgery,
travel expenses for medical appointments, etc. (See IRS Publication
502)
- Eligible expenses for participants, as well as their spouses and dependent
children qualify
- Expenses such as teeth whitening and cosmetic surgery are not primarily
for medical purposes and do not qualify
- Expenses that are eligible to be paid for by insurance are not out-of-pocket
expenses and cannot be claimed
- Federal income tax savings is usually 15% or 27%, depending on income,
but can range from 10% to 38.6%
- Social Security tax savings is 7.65%, unless annual income exceeds
$84,900, then the savings is 1.45%
- Under CWU's plan, the minimum is $240 a year and the maximum is $2,400
a year
- To avoid a forfeiture, individuals should set aside no more than they
conservatively plan to spend on out-of-pocket medical, dental and vision
expenses during the year
- Individuals who pay less than $240 a year for out of pocket medical,
dental and vision expenses should not enroll
- Money left in the account at year-end cannot be carried forward or
refunded and is lost. Use it or lose it
- Mail or fax to the vendor a claim form, bill or receipt,
and insurance payment statement
- The vendor process claims daily and participants should receive payment
within 10 days
- Participants have a choice of direct deposit or having a check mailed
to their home
- Expenses must be incurred between 1/1 and 12/31 of the plan year,
and claims submitted by 3/31 of the following year
- The universities have been asking the state to offer an FSA for several
years
- Implementing such a plan on a statewide basis required more resources
than the state was able to commit
- The Health Care Authority agreed to allow universities to go forward
as a pilot, with other agencies being included over the next several
years. Constraints on payroll systems made some universities unable
to implement so quickly.
- Through a competitive bid process, the state selected Fringe Benefit
Management Company (FBMC) out of Florida
- The vendor, FBMC, charges a fee of $4.25 per participant per month
- CWU has elected to pay the fee for participants in 2003 and will reevaluate
each year of the pilot
- After the pilot, when the state offers the plan to all employees,
the state will determine who pays the fee
- Enrollment forms must be received in the benefits office or mailed
to the vendor by 11/30 for 2003 participation
- Once enrolled, individuals are committed to make deposits for the
whole year. Mid-year changes in deduction amounts are only permitted
if the individual experiences a qualifying event, such as a change in
family status.
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