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Flexible Spending Account PlanAdministered by BenefitElect of Alabama, Inc.
What is a flexible spending account plan?
As a result of the Revenue Act of 1978, Congress created Section 125 and added it to the Internal Revenue Code. A Flexible Spending Account Plan (also known as a form of Cafeteria Plan or a Section 125 Plan) is a plan that employs the principle of elective compensation for the advantage of the employee. This plan enables you, as an eligible employee, to elect that a portion of your income be used to pay for expenses you know you will incur during the plan year which runs January 1 through December 31. Internal Revenue Service allows an extension of the plan year for the Medical Reimbursement Account through March 15th. Under the extension, expenses incurred during the "grace period" may be reimbursed from contributions made during the preceding year. If you elect to participate, the amounts contributed to the plan are not subject to federal and state income tax or FICA and Medicare tax. Therefore, you recognize the tax savings for incurred expenses and an increase in your spendable income. Who is eligible?
All individuals employed by Auburn University who are eligible to receive medical benefits pursuant to the group medical plan sponsored by the University are eligible to participate in the plan. The effective date for the beginning of this election is the first payday after January 1 and it will continue through the end of the plan year. Newly hired employees have 30 days from their date of hire to elect to participate in the plan. The effective date of the initial enrollment for a newly hired employee will be the first payroll processing period after receipt of the election form by the plan administrator and will last until the end of the plan year. A new election form must be executed each year during November for the next plan year. What does it cost to participate?
Nothing! The University pays all fees. How will this benefit me?
By having a specified amount of your gross income redirected to pay for eligible expenses during the plan year, you pay for these expenses with BEFORE-TAX dollars. Since your taxable income is lowered, you pay less federal and state income tax and FICA and Medicare tax. Therefore, your total take home pay (paycheck plus tax-free reimbursement) is more. How does the plan work?
OUTSIDE PREMIUM ACCOUNT:How will I know the status of my account?
You will receive a quarterly statement as well as a statement with each reimbursement payment. You will be able to access your account information on a twenty four hours a day, seven days a week basis on an internet web site www.fsa4me.com. Can I change my contributions?
The amount of your contributions to the plan must be determined prior to the beginning of the plan year and cannot be changed unless you have a change in your family status (marriage, divorce, spouse employment change, childbirth, adoption, death of spouse or dependent), you terminate employment with the University, a change in outside premiums which is beyond your control or a change occurs in your fixed dependent care payments which is beyond your control. If you have a change in family status during the plan year, you have 30 days in which to change your deduction. Please call the Payroll & Employee Benefits Office (844-4183) to request a Mid-Year change form. How are claims paid? 1. You may submit a claim for an eligible expense at any time during the plan year. You may submit a claim in the months of Jan, Feb. or March for the previous plan year. BenefitElect reimbursement forms are available in the Payroll and Employee Benefits Office for your use when submitting claims. You may fax to (866)395-4543, or email to firstname.lastname@example.org With your claim, you must include suitable proof of payment. For medical expenses not reimbursed by insurance or for dependent care, the proof should be a receipt of your payment from the provider. Please send copies of your receipts and retain the originals for your files. Claims are submitted directly to BenefitElect, our plan Administrator. Reimbursements are made by check or direct deposit each pay period from the BenefitElect office in Birmingham, AL. With your claim, you must include suitable proof of payment. For medical expenses not reimbursed by insurance or for dependent care, the proof should be a receipt of your payment from the provider. Please send copies of your receipts and retain the originals for your files. Claims are submitted directly to BenefitElect, our plan Administrator. Reimbursements are made by check or direct deposit each pay period from the BenefitElect office in Birmingham, AL. 2. Each employee participating in the unreimbursed medical spending account and dependent care spending account will be issued a debit card that may be used to charge expenses at participating providers at the time of service or purchase. When the debit card is presented at a participating doctor's office, pharmacy, or child care provider, the co-pay amount or child care payment is transferred from your spending account immediately. With the exception of debit card co-pay amounts, receipts are required to be submitted to BenefitElect within 10 days of incurring an expense on the medical reimbursement account. Submit to BenefitElect along with a DEBIT CARD RECEIPT TRANSMITTAL COVER SHEET. Use of the debit card is an additional optional convenience but is not a requirement. What happens if I terminate my employment?
If you terminate employment with the University and you still have money available in your flexible spending accounts, you may continue to access these monies for expenses incurred after you leave as long as you continue to make your designated contributions to the account (COBRA election). There are specific regulations governing continuation; therefore, arrangements must be made with the Payroll & Employee Benefits Office prior to termination to formalize these payments. If you do not elect COBRA at termination and still have money available in your flexible spending accounts, you have ninety (90) days following your termination date to submit claims for reimbursement. These claims must cover plan year expenses incurred prior to your termination date. OTHER IMPORTANT INFORMATION BE CONSERVATIVE! If you have any money left in your Outside Premium and/or Dependent Care accounts at the end of the year and have no outstanding claims for eligible expenses incurred during the plan year, that unreimbursed balance cannot be returned to you or carried over to the next year. This is known as the "Use It or Lose It" rule. However, the Medical Reimbursement Account has a "grace period" that begins on January 1st and runs through March 15th. Medical expenses incurred during this period may be reimbursed from contributions made during the preceding year that will be loaded to the Flex debit card along with my current plan year funds. These prior year funds will be debited first. Or you must submit receipts along with a Grace Period Form for reimbursements from contributions made during the preceding year by March 31. Taxes do not apply to reimbursement checks you receive under the plan, therefore, you do not report these as income on your tax return. Any claim you make for reimbursement under the plan cannot also be claimed as a deduction or credit on your tax return. Reimbursement/claim forms referenced in this document are available online from the Flexible Spending Account Plan section on the Payroll & Employee Benefits home page. The plan can provide significant tax savings to you; however, because social security taxes are reduced, you may have a slight reduction of social security benefits. This may be offset by simply investing a portion of your tax savings in a retirement program. Show Me An Example
The employee's savings will depend on the level of benefits elected under the plan and the employee's tax rate. The following examples will help illustrate the tax savings available under the plan: An individual in the 15% federal tax bracket elects $150 per month to cover unreimbursed medical expenses, a total of $1,800 for the entire year. During the year, the employee spends only $1,700, forfeiting the remaining $100 in the account. The employee still saves approximately $300 by participating in the plan.
An individual in the 25% tax bracket elects the same medical amount as the other example, but also elects $5,000 for dependent day care. The amount paid for dependent day care no longer qualifies for the child care credit on the individual's personal tax return; however, the employee saves approximately $2,400 as a result of participating in the plan.