Flexible Spending Plans Open Enrollment Begin February 1, 2016 A presentation of the Rock Island County Human Resource Department

Open Enrollment for the Rock Island County Flexible Spending Plans Begins February 1, 2016 and closes February 29, 2016 Important changes are occurring with length of the plan year (See slides 28 & 29)

Flexible Spending Plans, Also Known As… Cafeteria Plans Section 125 Plans FSA Plans

Why should I even be interested in a “Flexible Spending Plan”? Because it could save you money!!!

Advantages for Employees No Income Tax is withheld No FICA (Social Security)Taxes are withheld Benefits purchased with pre-taxed dollars in lieu of after-tax dollars

Example of Tax Savings John Doe has twin daughters. The twins are going to be getting braces on next year so he enrolls in the Flexible Benefits Plan. He elects to have $1,200 come out of his paycheck on a pre-tax basis. John earns $35,000 and his wife (a stay-at-home mom) earns no income. They file a joint return. The following chart will illustrate the tax savings for John Doe is approximately $362.00.

Example of Tax Savings w/ Cafeteria Plan w/o Cafeteria Plan 1. Adjusted Gross Income $35,000 2. FSA Election $ 1,200 $ 0 3. W-2 Gross Wages $33,800 4. Standard Deduction ($ 7,600) 5. Exemptions ($ 11,600) 6. Taxable Income $14,600 $15,800

Example of Tax Savings w/ Cafeteria Plan w/o Cafeteria Plan 7. W-2 Gross Wages $33,800 $35,000 8. Federal Income Tax (Taxable income x tax schedule) ($7,605) ($7,875) 9. FICA Tax (7.65% of W-2 gross wages) ($ 2,586) ($ 2,678) 10. After-tax Expenditures $ 0 ($ 1,200) 11. Take-home Pay $23,609 $23,247

Disadvantages for Employee Irrevocability of election during the current plan year (unless a Qualifying Event - Change of Status occurs) – We will address what a “Qualifying Event” is in a later slide

Disadvantages for Employee Social Security offsets (may adversely affect calculation of Social Security and other benefits at time of entitlement)

So what is a “Flexible Spending” Arrangement?

Flexible Spending Arrangement A flexible spending arrangement is an individual account funded by employee salary reduction on a pre-tax basis. Amounts placed in such an account are used exclusively to reimburse the employee for qualified unreimbursed medical expenses incurred by the employee, spouse and/or dependents during the plan year.

Flexible Spending Arrangement Elected funds are available on first day of plan. (You can receive the full amount of elected funds prior to full payroll deduction for the plan year.)

Examples of the Most Common Qualified FSA Expenses Medical, dental & vision expenses not covered under any other plan. Co-payments and deductibles that you are responsible for under your primary medical, dental or vision plan or under any other medical, dental or vision plan.

More Examples of the Most Common Qualified FSA Expenses Prescription drug co-payments Eye exams, eyeglasses, contact lenses & other vision expenses (i.e., Lasik eye surgery) Orthodontic expenses And the list goes on…

Examples of Non-Qualifying FSA Expenses Most over-the-counter medications such as antacids, cold medicines, pain relievers, and allergy medication (some may qualify if prescribed by a physician) Dietary Supplements, toiletries, cosmetics and sundry items (even if prescribed by a physician) Health insurance premiums that you or your spouse pays for coverage under another health plan.

More Examples of Non-Qualifying FSA Expenses Health club dues Bottled water Cosmetic surgery Vitamins, herbal supplements, Retin-A, Rogaine Maternity clothing, diaper service or diapers Travel expenses, meals and lodging

Important Once your deductions for the plan year start you cannot stop them unless there is a “Qualifying Event”.

Examples of the Most Common “Qualifying Event” Change in your legal marital status Change in the number of your tax dependents Change in employment status of employee or spouse (must affect eligibility)

During the year you may be required to substantiate or prove the validity of a claim

How do you substantiate or prove the validity of a claim?

Substantiation of FSA Claims By providing a bill or receipt from a physician,dentist, pharmacy, or other supplier which includes the following information: Date of Service Name of Patient Provider Name & Address Type of Service Amount patient is responsible for paying

Substantiation of FSA Claims By providing an Explanation of Benefits (EOB) statement indicating the deductible, co-insurance and amounts not covered by any medical, dental and/or vision plan under which the employee or any eligible dependent are covered.

Substantiation of FSA Claims Store receipts are acceptable ONLY for hearing aid batteries, contact solution and eligible over-the-counter medications. The receipt must have the following information printed on the receipt: Store Name Date of Purchase Product Name Amount of Product

Unacceptable Substantiation of FSA Claims Cancelled checks and credit/debit card receipts are NOT acceptable forms of claims substantiation. No reimbursements will be made on these types of receipts unless it is accompanied by one of the above required documentation.

Frequently Asked Questions

Frequently Asked Questions How long is a plan year? Prior to 2016, the Rock Island County plan year has been 12 months long, and was in effect from March 1st through the last day of February. For 2016, the plan year will be only ten months in duration – starting on March 1, 2016 and ending on December 31, 2016 Beginning on January 1, 2017, the plan year will return to being 12 months long – starting January 1st and ending December 31st

Frequently Asked Questions How much can I have taken out for the 10 months in 2016? $2,125.00 for Flex Spending (Unreimbursed Medical Expenses) $4,166.66 for Dependent Child Care

Frequently Asked Questions I have heard that if I do not use all my funds during the plan year that I lose them! No. The Rock Island County plan allows employees to roll over up to $500 to the next plan year.

Frequently Asked Questions Do I have to pay for the medical services prior to getting reimbursement? No. A participant only has to prove that the medical services were incurred. You do not have to prove that you paid for the services.

Frequently Asked Questions How do I gain access to my flex plan money? All participants receive a debit card to pay immediately for eligible medical expenses. Non-debit card medical expenses are reimbursed by check Is there automatic deposit capability? No. When the debit card is not used a reimbursement check is issued and mailed directly to the employee.

Frequently Asked Questions Can claims be submitted by fax? Yes, as long as all the required information needed is sent and the fax is legible.

Frequently Asked Questions Does employees have access to FSA claim information on line? Yes. This allows employees to view paid and pending claims as well as check on a claim or payment status.

Contact Human Resources Questions Contact Human Resources at (309)558-3610