Dolores Nehlig, Kristen Manes | 1/21/2016 12:02:47 PM
The links below will direct you to questions and answers that deal with each topic.
Q: What is a Flex benefit plan?
A: A Flex Benefit Plan is a type of Section 125 plan that allows employees to pay for certain expenses with pre-tax dollars. There are four categories of expenses that qualify under Section 125 that can be utilized by employees to reduce their taxable income. Those categories are: group insurance premiums, out-of-pocket medical expense reimbursement, dependent day care expense reimbursement and private insurance expense reimbursement.
Q: When am I eligible to join the Flex Benefit Plan?
A: Eligibility requirements are set by the employer: LSU AgCenter employees must be appointed for more than 120 days and for 75% of full-time effort or greater.
Q: What happens if I don’t make my decision to participate in the Flex Benefit Plan during the first 30 days of my employment?
A: You must wait to participate in the Plan until the beginning of the next plan year (signing up during Annual Enrollment (October 1 - October 30) beginning January 1. However, if you experience a major change in status before the current plan year ends, you may have an opportunity to make an election change for the remainder of that plan year.
Q: Under what circumstances can I change my election once the plan year has begun?
A: You can only change your election during the plan year if you have a major change in status. A major change in status includes such events as: marriage, divorce, death of a spouse or child, birth or adoption of a child, termination or commencement of employment by you or your spouse, a change in employment hours from part-time to full-time or from full-time to part-time status by a plan participant or spouse, accessing an unpaid leave of absence by a plan participant or spouse, taking a paid or unpaid leave of absence as qualified under the Family and Medical Leave Act (FMLA), or a significant change in health insurance coverage of a plan participant or spouse directly attributed to the spouse’s employment (refer to your Summary Plan Description for a current list of allowable status change events).
Q: Will the Flex Benefit program affect any of my other group benefits?
A: You may not participate in the Health Spending account if you (or your spouse) is participating in a high deductible health insurance plan with a Health Savings Account (HSA). Contributions to the HSA AND the FSA are not allowable under federal tax law. Under rare circumstances, your Flex Benefit election may affect your 401(k) and/or profit sharing plan(s). Please refer to your 401(k) and/or profit sharing plans for clarification.
Q: Does this pre-tax feature apply to dependent day care, out-of-pocket medical and private insurance expenses?
A: Yes, it does. The dependent care, out-of-pocket medical and private insurance reimbursement accounts are designed to allow participants to redirect money on a pre-tax basis to help pay dependent day care, out-of-pocket medical and private insurance expenses which are not covered or not reimbursed by any other Plan.
Q: Can I pay my employer-sponsored insurance premiums through the flex benefit plan?
A: Yes. This is probably the simplest use of the Plan. Instead of having your employer deduct your premium contribution from your paycheck after taxes, you can have your employer pay your premium contribution before taxes are calculated. You DO NOT need to submit a reimbursement claim for your insurance premiums. Your premium cost-share is automatically deducted from your paycheck, before tax, and then mailed to your group insurance carrier.
Q: Is the employer reducing a participant’s wages when the participant uses tax-free dollars to pay his/her portion of their group insurance premiums?
A: No. Actual wages are not reduced. Only the amount of the participant’s pay that is reported for income tax purposes is reduced, thereby decreasing his/her tax liability and saving the participant money.
Q: Why is it beneficial to participate in the group insurance premium portion of my Flex Benefit Plan?
A: When you participate in the group insurance premium portion of the Flex Benefit Plan, your group insurance premiums will be deducted from your gross paycheck before Social Security, federal, and in most cases, state and local taxes are calculated, thereby eliminating the requirement to pay taxes on those insurance premium dollars. If you choose not to participate in the group insurance premium portion of the Flex Benefit Plan, your premium contributions will be deducted from your paycheck after Social Security, federal and state income taxes are deducted.
Q: For what types of medical expenses can I be reimbursed?
A: You can receive reimbursement for any medical, dental and vision care expenses for you, your spouse or for any dependent family member that qualifies under Section 213d and Section 105 of the Internal Revenue Code. For example, expenses applied toward your yearly deductibles, plan co-payments, hearing aids, eyeglasses, contact lenses and other items that are not covered under your health and dental plan(s) all qualify under the Flex Benefit Plan. Note: Please refer to your employee benefit plan to determine eligible expenses. Also, if you are reimbursed from an insurance plan for any of the expenses, you cannot be reimbursed under this Plan for the same expense. If your insurance pays for a portion of the expense, you can file a claim for the unpaid balance through the Flex Benefit Plan.
Q: Can the Flex Benefit Plan reimburse my doctor or dentist directly?
A: No. Reimbursements will always be made to you. When you receive your Flex Benefit Plan reimbursement, you have the option of paying your provider or reimbursing yourself with your tax-free Flex Benefit.
Q: Is there a limit to what I can claim for dependent day care expenses?
A: Yes. The IRS has established the dependent day care reimbursement account limit at $5,000 each calendar year. In addition, if you claim reimbursement through the dependent day care reimbursement account, you cannot claim the same expenses on your tax return.
Q: For what type of dependent day care expenses can I be reimbursed?
A: The expenses must be for a qualified dependent. A qualified dependent is a child under age 13, or any other person who resides in your household who is mentally or physically unable to care for himself/herself. The dependent day care expenses must be for care to enable you and your spouse to be gainfully employed. You cannot claim reimbursement for babysitting expenses while you go to a movie, to a restaurant for dinner, etc.
Q: I have one child, and both my husband and I work full-time. How do I know if the dependent day care reimbursement account is a good idea for me?
A: In most circumstances the tax advantages are greater for you through the Flex Benefit Plan than the IRS 2441 Child and Dependent Care Tax Credit. Please consult your tax advisor or financial planner for additional advice on your personal tax situation.
Q: My wife is a full-time student who doesn’t work. Is there any way we could use the dependent day care reimbursement account?
A: Yes. Because your wife is a full-time student, you can participate in the Flex Benefit Plan. However, you are limited to redirecting $200 each month ($2,400 each year) for one child and $400 each month ($4,800 each year) for two children. In this case the dollar limits follow the IRS tax credit guidelines rather than the IRS Flex Benefit guidelines of the $5,000 maximum.
Q: I am married, but my spouse and I file separate income tax returns. Can we reduce our salaries up to $10,000 for our childcare expenses?
A: No. The maximum aggregate amount you can reduce your salary by is $5,000. If you file separate returns, the maximum each of you can reduce is $2,500.
Q: I spend $20 each week driving my son between home and the day care center. Can I submit mileage to the dependent day care account?
A: No. Transportation expenses for day care needs are not eligible expenses. There are provisions for submitting transportation expenses through the out-of-pocket medical expense category for travel to and from a medical facility, but no transportation expenses are allowed through the dependent day care category for travel to and from a day care facility.
Q: My daughter is in kindergarten. Since the school “takes care of her” during the day while I’m at work, can I be reimbursed for that cost?
A: No. Any cost related to sending your child to kindergarten is not an eligible day care expense. Any before or after school day care program would be eligible.
Q: I am sending my child to summer camp during the day. During this time, I will not have to pay for day care, but I will have to pay for the camp. Is this an eligible expense?
A: Yes, as long as the cost of the camp is a “reasonable comparison” to the alternative day care cost and your child is under age 13. Remember only the expenses for eight (8) hours a day while you and your spouse are gainfully employed qualify.
Q: Must I provide any information about my day care provider when I submit a claim for reimbursement?
A: Yes. Unless the provider of your dependent day care service is tax-exempt, this provider must supply its taxpayer ID number to anyone planning to take a tax credit on his/her federal income tax return, or an exclusion from his/her gross pay through the Flex Benefit Plan. If the provider is an individual he/she must supply his/her social security number. Any of the following forms of receipts are allowable for dependent day care reimbursement through the Flex Benefit Plan: the day care provider’s signature, day care center receipts, or a handwritten receipt from your day care provider.
Q: When would my salary reduction begin?
A: Your first deduction would be the first pay period in the first month of the plan year. Your last deduction will be on the last pay period of the plan year. For example, your gross pay will be reduced each pay period by whatever dollar amount you have chosen from the beginning of your plan year until the end of your plan year. Your election will not take effect prior to your meeting the eligibility requirements of your plan.
Q: How will the salary reduction be reflected on my paycheck?
A: Your paycheck stub will show the amount you are having deducted for each Flex Benefit category in which you are participating. For example, if you are having $10 deducted each paycheck for out-of-pocket medical expenses, your paycheck stub may show FLEX MED $10.
Q: What happens to the money after it is redirected from my paycheck?
A: The amount that you select to be redirected from your gross pay is set aside in the appropriate account every pay period waiting for you to submit a claim for the reimbursement of your expenses.
Q: How does a reimbursement category work?
A: When you incur any dependent day care, out-of-pocket medical or private insurance expenses that are not covered or reimbursed by any other source, those expenses can be submitted and reimbursed from your Flex Benefit Plan on a tax-free basis up to your plan year election.
Q: If I choose salary reduction, how often is the money deducted from my paycheck?
A: A specific amount will be deducted from each paycheck based on the amount you have elected for each category. The money will be used to reimburse you on a pre-tax basis for the expenses you incur throughout the plan year.
Q: Can I put cash into a reimbursement account?
A: No. Because you have already paid taxes on any cash, there would be no point to direct cash into a Flex Benefit Plan reimbursement account. The object of the Plan is to save you tax dollars on your anticipated expenses.
Q: Do I decide how to use the money going into my account?
A: Yes. When you enroll and choose your salary reduction amount, you decide how much goes into each category and what expenses that category will cover. However, just because you’ve earmarked the money one way doesn’t mean you can’t pay for another expense with the money as long as the expense qualifies and is within the same reimbursement category. There are three reimbursement categories or accounts to consider: dependent day care, out-of-pocket medical and private insurance expense reimbursement. It is important to consider these allocations carefully because money cannot be transferred from one category to the other. For example, money set aside for dependent day care cannot be used to reimburse you for medical expenses. Likewise, medical expense money cannot be used for dependent day care or private insurance expenses. The Employer-provided group insurance premiums category is also a pre-tax category. However, your cost share for your employer-provided insurance premium(s) cannot be reimbursed to you. It is deducted from your paycheck on a pre-tax basis and then paid directly to your insurance carrier or to your self-funded benefit plan.
Q: Can I claim expenses that were incurred prior to joining the Flex Benefit Plan?
A: No. Your expenses must be incurred during the Flex Benefit Plan year to be reimbursed with pre-tax dollars.
Q: When I participate in a Flex Benefit Plan, I will not have to pay federal, Social Security, and in most cases, state and local taxes on the money that is redirected for my expenses. When I retire and accept Social Security payments, will I notice a deduction in my Social Security Benefit?
A: In most cases you will not notice a reduction in your Social Security retirement benefits. You may notice a reduction if you are within five years of retirement and have redirected over $2,000 each year for each of those five years. Please contact the Social Security Administration office for further details on your particular situation.
Q: Why did the IRS implement the “Use it or Lose it” provision?
A: Simply stated, Flex Benefit Plans were being misused. To avoid any further abuse of accounts, the IRS states that once you set aside the money for a reimbursement account, you must use the dollars to pay for benefits during that plan year. If any money is left in any account(s) at the end of the plan year, it must, by law, be forfeited by you and returned to your employer as taxable income.
Q: How can I be sure I get the most benefit out of the Flex Benefit Plan?
A: It is better to plan conservatively and only set aside money for expenses that you can be confident will be incurred. For example, you may know that it is time for an eye exam and new eyeglasses or that your child will need orthodontia. Similarly, dependent day care expenses are relatively easy to estimate since they are usually a set amount each week. Be sure to take into account any vacation or holiday time when day care may not be required.
Q: How often can I change the dollar amount directed into my account?
A: Before the start of each plan year, you will have an opportunity to review your expenses for yourself and your family. Once the plan year starts, you cannot change the election amount or stop your participation until the start of the next plan year. Prior to the start of every new plan year, you will be given the opportunity to make an election for the next plan year. The only exception to this above-mentioned IRS rule is in the case of a major change in status. If you have a major change in status, the IRS states that you can change your election if you wish within a reasonable amount of time of the occurring change (event). The AgCenter’s policy is that the change must be made within 30 days of the event.
Q: What do I need to file my claims?
A: All claims submitted must have the necessary documentation. Any expenses that are eligible for reimbursement or payment under any other insurance plan must first be submitted to that plan. Therefore, an Explanation of Benefits (EOB) form must accompany a claim for reimbursement of those expenses from the insurance carrier. If you have an EOB, it is not necessary to send any other receipts for bills showing what expenses are being claimed. For those expenses not covered under any other plan, forward a claim along with copies of bills or receipts for the expenses incurred. You must show the date of service on all claims submitted. On occasion, a letter from a doctor recommending the purchase of a medically necessary item, piece of equipment, or a specific treatment may be required. Remember, to qualify, an expense only needs to have been performed/incurred, but not already paid for by you.
Q: What information do I include when filing a claim for dependent day care expenses?
A: You MUST provide the name of the provider, provider’s address, the provider’s tax ID number or Social Security number and dates of service along with one of the following: provider signature, handwritten receipt from your provider, or day care center receipt.
Q: Do I have to pay for the expense (day care, medical or private insurance) before I can be reimbursed for that expense?
No. To be able to submit for reimbursement, the service does have to be incurred, but it does not have to be paid for. You must obtain a bill from your service provider (doctor, dentist, etc.) listing the date(s) of service, the provider’s name, and the services that were rendered to submit your claim for reimbursement.
Q: Will my documentation be returned?
A: No. Please forward copies of your bills or receipts and keep the originals. We cannot return any documentation.
Q: How often should claims be submitted?
A: You may submit your claims whenever you wish. You may submit claims daily, weekly, monthly, quarterly or hold them all for submission at one time; it is completely up to you. In all situations, your employer will provide an additional period of time after the end of the plan year to submit your claims. This time period is called the grace period. For the AgCenter, participants in the Plan have two and one-half months after the end of the Plan Year to incur and submit claims for the prior year. The effect of the Grace Period is that a Participant has as long as 14 months and 15 days to use the benefits or contributions for the Plan Year before those amounts are “forfeited” under the “use-it-or-lose-it” rule. See page 21 of the Plan Document for more details.
Q: How are claims submitted?
A: Claims can be e-mailed directly to firstname.lastname@example.org or faxed to Boon-Chapman directly with the supporting documentation.
Q: Who submits the claims?
A: The participant (employee) submits claims with supporting documentation to Boon-Chapman. The employer is not involved with the filing of claims.
Q: Can Employees receive payment from their Flex Benefit Plan without actually having the money in their account(s)?
A: Dependent Day Care Claims: NO. By IRS regulations, Boon-Chapman will reimburse eligible day care claims up to the balance deposited in employee’s day care account on each check issuance date. If an employee claims an amount greater than the amount deposited into their day care account, the amount that is over will be placed in a “pending” field. The pending amount is paid automatically on the next check issuance date (again, up to the amount deposited in that account), up to the employee’s Plan Year election.
Out-of-Pocket Medical Expenses: YES. By IRS regulations, Boon-Chapman will reimburse any eligible out-of-pocket medical expense up to the employee’s Plan Year election without the funds actually being in the employee’s account. The IRS states that medical expenses are unpredictable; therefore these monies must be available to an employee when needed, not when the money is actually in the account. The employee’s account will fall into a negative, with the employer funding that amount. As deductions continue to be taken out of the employee’s paycheck, the negative account balance will continue to decrease. At Plan Year-end, the account balance should be zero.
Q: Do employees have to pay for services before being reimbursed by their Flex Benefit Plan?
A: No. The service has to be incurred/performed during the Plan Year (and grace period), but does not have to be paid. The employee needs to obtain a bill from the service provider listing the date(s) of service, the provider’s name, and the service(s) performed. If it is an out-of-pocket medical expense claim, the employee could instead use the Explanation of Benefits (EOB) from their insurance carrier. The employee can send a copy of a bill or EOB along with a completed claim form to Boon-Chapman. Boon-Chapman will issue the refund. The participant can then reimburse the service care provider. A participant can claim up to, but not more than the Plan Year election.
Q: Do employees with multiple bills or receipts have to complete a separate claim form for each bill or receipt?
A: No. For convenience, employees who have multiple bills to submit need only fill out one claim form showing the total of all billings enclosed. It is not necessary to fill out a separate claim form for each billing.