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Flexible Spending Accounts

Health Care Reimbursement (HCR) & Dependent Care Reimbursement (DCR) Accounts

FSA is an employer-sponsored benefit plan that allows an employer to deduct pre- tax dollars from an employees paycheck to pay for eligible healthcare and/or dependent care expenses incurred while participating in the plan. FSA accounts are exempt from federal taxes, Social Security (FICA) taxes and, in most cases, state income taxes.

What is the Health Care Reimbursement Account?

The Health Care Reimbursement Account is a fringe benefit plan, which is authorized under the IRS code Section 105. It is a tax reduction plan, not an insurance plan. The Health Care Reimbursement Account allows employees to pay for their out-of-pocket medical expenses on a before-tax basis.

What is the Dependent Care Reimbursement Account?

The Dependent Care Reimbursement Account is a fringe benefit plan, which is authorized under the IRS code Section 129. It is a tax reduction plan, not an insurance plan. The Dependent Care Reimbursement Account allows employees to pay for all of their child care expenses on a before tax basis.

What can we expect to save with these plans?

On average, the employee savings will be approximately 30% and employer savings 7.65% of the employee contributions for benefits.

Can we implement only one plan without the other?

Yes, either plan can be implemented on its own.

Do we need a lot of employees in order to benefit?

No. The tax savings are created by employee contributions. As long as the plan does not favor key executives and owners, there is no minimum number of employees necessary.

What are the benefits of implementing either of these plans?

Since participation reduces an employee’s gross taxable pay check, you are giving that employee a raise to their take home income. As the employer, when your employee reduces their taxable income, you are also reducing the income you have to pay matching FICA on.

This will help you hire and retain better quality employees. With these plans there are considerable savings for the employee. You now are able to offer benefits that were once only affordable to larger corporations.

Is it required for employees to purchase medical coverage in order to participate?

No. If an employee has coverage elsewhere, he/she may either decline to participate or may participate in any pretax benefit plan.

If I am enrolled in my spouse’s Cafeteria Plan, can I also enroll with my current employer?

Yes. However, you may only be reimbursed for an expense from one plan. You cannot be reimbursed for the same expense from both accounts. (i.e. “Double Dipping”)

When can my plan begin?

As soon as you decide to begin saving for yourself and your employees.

CONTACT US

Advanced Benefit Strategies
30 Mill Street
Unionville, CT 06085

Phone: 877-732-8125
Fax: 860-673-2207

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Advanced Benefit Strategies is an Equal Opportunity Employer.
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