Flexible Benefits Plan Administration
Flexible benefit plans present a classic win-win situation for both employees and employers. A flex plan allows employees to reduce their taxable income by setting aside pre-tax funds to pay for specific expenses. Reducing taxable income results in reducing income tax liability. Further, participation in a Flex Plan has no impact on how much one can contribute toward a 403(b) tax-deferred annuity. In addition, funds reimbursed to an employee from his or her flexible benefit account are tax-exempt.
Employers benefit from realizing FICA savings (and possibly savings from other employer taxes as well) because of the reduction in employees’ taxable income. The resulting FICA savings typically permit the employer to pay a third-party administrator and still net a substantial savings. Third-party administrators do the administrative work related to flexible spending plans, such as enrolling employees, processing payments and record keeping.
With such a program in place, the employee can re-direct dollars already earmarked for family needs and pay these expenses on a “before-tax” basis. Eligible expenses for this program include:
Premium Only Plan - Employee share of any group premiums paid for Health, Dental and Vision benefits.
Unreimbursed Medical Expenses - Medical, dental, prescription drug and vision care costs not paid by the employee’s or spouse’s insurance program (or expenses when an insurance plan is not in place).
Child and Dependent Care - Dependent care service for an employee’s dependent under age 13, or for an employee’s spouse or dependent if he or she is incapable of self-support.
When a participant incurs an eligible expense, he or she simply “vouchers” that expense from the appropriate account. Following receipt or proof of expense for the amount claimed, a check will be issued to the participant. This reimbursement to the participant is not now or not ever subject to Federal, State or FICA taxes.
Instituting this program does not in any way change the benefits provided by participants’ underlying insurance plans. After all underlying health plans have paid all eligible expenses, this program permits expenses normally paid out-of-pocket (after-tax) to be paid pre-tax.
NYSUT Member Benefits Trust has negotiated special discounted prices and services with the third-party administrators who provide this endorsed service. P&A Administrative Services, Inc. provides administrative services west of Syracuse, and The Preferred Group provides services Syracuse and east. The cost of these services is negotiable.
The Preferred Group Plans, Inc. and P & A Administrative Services, Inc. Section 125 Plans are NYSUT Member Benefits Trust (Member Benefits)-endorsed programs. Member Benefits has an expense reimbursement/endorsement arrangement of $.10 per participant per month. All such payments to Member Benefits are used solely to defray the costs of administering its various programs and, where appropriate, to enhance them. Member Benefits acts as your advocate; please contact Member Benefits at (800) 626-8101 if you experience a problem with any endorsed program.
Contact Information:
For a more complete explanation and presentation on how this plan can work for your group, or for more information, please contact Member Benefits toll-free at (800) 626-8101, weekdays from 9 a.m. to 5 p.m. Eastern Time.