What is a Healthcare Flexible Spending Account (FSA)?
A Flexible Spending Account (FSA) allows you to set aside part of your pre-tax wages to pay for certain eligible healthcare expenses for yourself, your spouse, and your eligible dependents. Eligible expenses under the FSA Account include prescriptions, contact lenses as well as other medical, dental and vision services. FSA Accounts are a great way to use pre-tax dollars and reduce your out of pocket medical expenses!
How do Healthcare Flexible Spending Accounts (FSA) work?
Before the effective date of an FSA plan year (determined by your employer), an employee will calculate how much money their household will spend during the plan year on medical, dental and vision services. This annual number is divided by the amount of payrolls during the plan year and this amount will be deducted from the employee's payroll each pay period and deposited into their FSA. For example: If you wanted to put $520 in the account and you are paid on a weekly basis, then $520 divided by 52 payrolls would equal $10 per paycheck. This money comes out before Federal Tax, FICA Tax, and State Tax. Check out our FSA Calculator here.
Each plan year gives you the opportunity to change your FSA election. Also if there is a qualifying event such as marriage, death, divorce, legal separation, adoption or birth in the immediate family, they can increase or decrease the annual election within a 30-day period following the event.
What is a Dependent Care Account (DCA)?
A Dependent Care Account allows you to set aside pretax dollars to help with the cost of care for eligible dependents, children under the age of 13 or aging parents while you’re at work. Examples of eligible care include: Preschool, Daycare, Babysitting, Summer Day Camp, After School Programs and Adult Care. Please Note: Kindergarten is not an eligible expense under the Dependent Care Account.
How does the Dependent Care Account (DCA) work?
A Dependent Care Account works similar to a Health Care FSA Account. The difference with the Dependent Care Account (DCA) is the funds accrue upon the payrolls, crediting to the Dependent Care Account. The maximum reimbursement limit is $5000 per year of $2500 if married and filing separately. All of these limits apply to the date the services incur, not the date billed or paid.
What is a POP Plan?
A Premium Offset Plan is a provision under the Internal Revenue Code Section 125 that enables employers to allow their employees to have certain premiums that they have to pay out of their paycheck, to be taken out before the employee pays tax. These premiums would be taken out before the Federal tax, FICA tax, and the State tax. The POP also allows the employers to save on the matching FICA that they would have had to contribute on this amount.
What Premiums Qualify?
- Employee Group Term Life (up to $50,000)
- Medicare Supplement
- Hospital Indemnity