2. FLEXIBLE SPENDING ACCOUNT (FSA)

3. What is an FSA? Lets find out!

4. What is an FSA? A Flexible Spending account (FSA) allows employees to set aside a portion of their salary on a pre-tax basis. The money can then be used to reimburse yourself for qualified health care and/or dependent care expenses. Your taxable salary is reduced by the amount you set aside in your account(s), so you pay lower income taxes and Social Security taxes. In other words, you reduce your taxable income and pay yourself back for health and or dependent care costs your incur.

5. FSA Elections Participation in the FSAs is voluntary. Employee’s decide whether to participate and how much money to set aside, within the minimums and maximums show below. Health Care AccountDependent Care Account Your maximum annual contribution $5,000$5,000* Your minimum annual contribution $200 Your minimum reimbursement amount $20 Annual claim submission deadline All claims incurred between January 1st thru December 31st must be received at Aetna by February 15, each year. *Additional limits on Dependent Care FSA contributions.

6. Who is eligible?

7. Eligibility Regular full time/ part time NAF civilian employee Scheduled to work at least 20 hours per week Within 31 day window (from date of hire or eligible status change) or annual enrollment period Flexible employees are NOT eligible You must enroll each year You can enroll in one or both FSA’s

8. Eligibility cont… You are not required to be enrolled in a DoD NAF medical plan Some employees deemed “Highly Compensated” may be restricted in the amount they are able to defer to the Dependent Care FSA as a result of non- discrimination testing* We do not offer a debit card option!

9. Can changes be made to FSA election?

10. FSA Election Changes FSA ELECTION CHANGES AVAILABLE WITHIN 31 DAYS Qualified Family Status Change Health Care FSADependent Care FSA MarriageEnroll, Increase, DecreaseEnroll, Increase DivorceEnroll, Decrease Death of SpouseEnroll, Increase, Decrease Birth/Adoption of childEnroll, Increase Gain custody/guardianship of child Enroll, Increase Death of childDecrease Lost custody/guardianship of child Decrease

11. FSA Election Changes cont… FSA ELECTION CHANGES AVAILABLE WITHIN 31 DAYS Qualified Family Status Change Health Care FSADependent Care FSA Dependent child no longer eligible for health coverage DecreaseN/A Dependent care cost has changed N/AIncrease, Decrease Spouse lost health coverage under another plan Enroll, Increase I’m no longer covered under spouse’s health plan Enroll, Increase Change in number of tax dependents Enroll, Increase, Decrease If you don’t report the family status change within the 31-day period, you will not be allowed to make the change until the next FSA open enrollment period.

12. Cutoff on Enrollments & Increases Effective October 1 st through December 31 st of each Plan year, the following actions will not be allowed for the current year: Enrollments, whether due to new hire event or qualifying Family Status Changes Increases due to Family Status Changes

13. What happens to an FSA during a leave of absence?

14. Paid Leave of Absence Participation in the FSAs will not be affected during a paid leave of absence. Payroll deductions will continue, and the FSA’s can still be used to reimburse eligible expenses.

15. Unpaid Leave of Absence Contributions/participation in the FSA stops on first day of absence. You can continue to be reimbursed for expenses incurred while you were actively working. You cannot be reimbursed for expenses incurred during the unpaid leave of absence. Any balance in your account made before leave of absence can be used for claims incurred upon your return to work.

16. Returning from a Unpaid Leave of Absence Upon return, the contributions required to meet the election for the Plan year will be recalculated (and therefore will increase) over the remaining pay periods in the year. Health Care FSA - Employee will be reinstated fully in the HCFSA Plan (retroactive to the date absence began). After reinstatement, they may request reimbursement for expenses incurred at anytime in the year when enrolled. Dependent Care FSA – Employee will be reinstated in the DCFSA Plan as of the date of return. They may request reimbursement for expenses incurred at anytime in the year when enrolled, except those incurred during a period of unpaid leave of absence.

17. When employment ends….

18. When Employment Ends When employment ends, FSA contributions end. You can still be reimbursed for expenses incurred up to your last day worked, provided balance is sufficient. You have until February 15 th of the next year to submit claims.

19. Rehires If you terminate employment with MCCS, and are rehired as regular full time, or regular part time, your will automatically be re-enrolled into the FSA plan that you were enrolled in prior to termination. The bi-weekly contribution will be recalculated based on the initial annual election amount.

20. USE IT OR LOSE IT! February 15 th is the cutoff to submit claims incurred by December 31 st of the prior year.

21. What happens to forfeited funds? Used to offset expenses of terminated participants that used their benefits before paying full election into FSA Used to offset administrative expenses

22. Changes due to:

23. Health Care Reform Changes Health Care FSA: Expenses for Over the counter (OTC) medicines will only be reimbursed from an FSA if used of the medicine has been prescribed by a doctor, effective January 1, 2011. Other OTC items are still reimbursable. Effective January 1, 2013, the new maximum deferral limit for the Health Care FSA will be $2,500.

24. Non-discrimination Testing

25. Non-discrimination testing IRS established nondiscrimination tests for HCFSA & DCFSA Determine if the plan discriminates in favor of highly compensated employees (HCE’s) Conducted in February Consequences of failing: HCE’s will have to reduce their deferral election to meet to meet requirements to pass testing Ensures HCE’s do not have a greater opportunity than NON-HCE’s

26. Enrollment Statistics

27. 2011 FSA ENROLLMENTS

28. 2011 vs 2012 Enrollments Data as of March 2012

29. 2011 Plan Experience Employee Participation Number of Participants Health Care234 Dependent Care 19 Both Health and Dependent Care 26 Total Participants279

30. 2011 Year End Contribution and Balance Summary Health CareDependent Care Total EE Contributions$346,124.81 $148,440.26 $494,565.07 Reimbursements$326,558.17$146,609.73 $473,167.90 Plan Balance$ 19,566.64$ 1,830.53 $ 21,397.17

31. Unused Funds Health Care Dependent Care Total Total Unused Funds $27,643.92 $ 1,830.53 $29,474.45 Number of Participants 66 7 73

32. Negative Balance Summary (Health Care Only)** Total Amount Lost to Plan as Result of Negative Balances $8,077.27 Number of Participants with a Negative Balance at Year End 19

33. FSA ENROLLMENT CONTEST !!!!

35. Communicating the Benefit of an FSA! Member education Brainshark – www.usmc-mccs.org/employ/benefits/fsa.cfm FSA Calculator – www.aetnafsa.com Q & A Documents – (on Crossroads) Valuable benefit Understand the benefit!