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.
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.
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.
On average, the employee savings will be approximately 30% and employer savings 7.65% of the employee contributions for benefits.
Yes, either plan can be implemented on its own.
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.
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.
No. If an employee has coverage elsewhere, he/she may either decline to participate or may participate in any pretax benefit plan.
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”)
As soon as you decide to begin saving for yourself and your employees.
Advanced Benefit Strategies
30 Mill Street
Unionville, CT 06085