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, the Dependent Care Reimbursement Account can be implemented by itself or in conjunction with Health Care Reimbursement Account.
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. 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.