Flexible Benefit Plan
How A Flexible Benefits Plan Works For You
A Flexible Benefits Plan is an innovative new way for you to save tax dollars while receiving the best in fringe benefit plans. By participating in a Flexible Benefits Plan, you can choose the benefits that you most need and want from a "menu" of benefits, such as pay for certain medical and dental expenses and adult and child dependent care with "untaxed" dollars. You can also save substantial tax dollars and increase your net take home pay.
By electing to redirect a portion of your salary to your Employer's Flexible Benefits' Plan, you essentially "bank" your money in a TAX-FREE account. The money is used to pay for all those medical and dental expenses that formerly ate away at your take home pay.
You still receive excellent fringe benefits – but you are also saving tax dollars because you are paying for the benefits through the Flexible Benefits Plan. Here is how one employee increased his monthly take home pay by $27 through participation In a Flexible Benefits Plan.
| Without a Flex Benefits Plan |
With a Flex Benefits Plan |
Benefits Bank | |
| Salary | $1,000 | $1,000 | –â¶Ä“ |
| To Flex Benefits Plan |
$0 | ($100) | $100 |
| Taxable Salary | $1,000 | $900 | –â¶Ä“ |
| Income Tax (20%) | $($200) | ($180) | –â¶Ä“ |
| Social Security Tax (7.65%) |
($76) | ($69) | –â¶Ä“ |
| Salary after taxes | $724 | $651 | –â¶Ä“ |
| Medical Expenses | ($100) | ($100) | –â¶Ä“ |
| Take Home Pay | $624 | $551 | –â¶Ä“ |
| From Flex Benefits Plan |
$0 | $100 | $100 |
| Net Take Home Pay | $624 | $651 | –â¶Ä“ |
| Net Savings with a plan |
–â¶Ä“ | $27 | –â¶Ä“ |
Qualifying Dependent Care Expenses
Covered dependent care expenses include those that are necessary for you and your spouse (if married) to be gainfully employed, such as:
- Expenses paid to a dependent care center or care provider.
- Expenses paid for care of a dependent under age 13.
- Expenses paid for care of another dependent who is physically or mentally incapable of caring for himself.
Qualifying Unreimbursed Medical Expenses
Only expenses NOT reimbursed by Insurance can be claimed:
Ambulance hire
Artificial limbs & teeth
Automobile modifications (hand controls, special equipment, mechanical lifts)
Braille books & magazines
Crutches
Drugs & medical supplies
Elastic hose, medically prescribed
Eyeglasses/contact lenses
Fees:
Acupuncture
Anesthetist
Blood donor
Chiropodist
Chiropractor
Clinic
Dentist
Diagnosis
Diathermy
Examination, physical
Eye examination
Gynecologist
Hospital
Laboratory
Lip reading lessons for the deaf
Medical information plan
Midwife
Nurse
Oculist
Opthamologist
Optician
Optometrist
Oral surgery
Osteopath
Pediatrician
Physician
Physiotherapist
Podiatrist
Practical Nurse
Psychoanalyst
Psychologist
Specialist
Surgeon
Therapy
Halfway house residency
Hearing devices
Hospital bills
Laetrile, when prescribed by a doctor
Nursing care
Obstetrical expense
Operations – related treatments
Oxygen equipment
Rental of medical or healing equipment
Retirement home fees, portion allocable to medical care
Sanitarium or rest home
Seeing-eye dog
Special education
Support or corrective devices (including special mattress or board for arthritis
Telephone for the deaf
Television set modification to receive closed captions
Therapy treatments
Transportation expense relative to illness
Wheelchair
X-rays
Frequently Asked Questions
What is a Flexible Benefits Plan?
It is a voluntary plan that provides you with the choice of receiving your full compensation in cash, or to convert part of your compensation into TAX-FREE benefits.
How can redirecting my compensation benefit me?
The biggest advantage is the tax savings. Since a Flexible Benefits Plan uses pre-tax dollars for reimbursement of qualifying expenses, you reduce your Income taxes and social security tax by reducing your taxable salary.
If I redirect part of my pay, won't I make less money?
No. Your net take home pay will increase by the amount of tax savings.
Why should I participate in the Medical Reimbursement Plan if I already have medical insurance?
The Medical Reimbursement Plan offers reimbursement of medical care expenses NOT reimbursed by insurance. For example, expenses for annual physicals, eye exams, glasses, prescribed medicine, and hospital care.
Can I change or revoke my elections during the plan year?
Yes, if there is a material change in your circumstances. This includes marriage, divorce, death of a spouse or child, birth or adoption of a child, termination or commencement of a spouse's employment, and other events that the Administrator determines, will permit a change or revocation of an election during a plan year.
What documentation do I need to be reimbursed for expenses I incur?
The company will provide you a reimbursement request form. You will be required to attach a copy of the medical or dependent care billing to this form and mail to SIEBA.
What if I don't use all the money I redirect?
Careful review of expenses before making an election can minimize or eliminate any-unused benefits at the end of the year. However, If you do have funds elected but unused at the end of the year, the law requires that they be forfeited.
Are there any negatives I should know about?
Yes, because you are not paying social security tax on that portion of your income that has been redirected, your social security benefits may be slightly reduced.