Even with the benefit of a well-designed medical insurance program by suchenfz


									                The Bloomfield College Flexible Spending Account Plan

Even with the benefit of a well-designed medical insurance program, almost everyone
spends a substantial amount of money out-of-pocket on medical expenses. These include
co-pays for doctor’s visits and prescription drugs, uncovered dental expenses,
optometrist’s services, contact lenses, over-the-counter drugs, and additional coatings on
glasses. Under Federal tax regulations, with a little advance planning, expenses of this
sort may be paid on a before-tax basis, leading to savings of hundreds or even thousands
of dollars in one’s year-end tax bill.

The same possibility exists for child care expenses. If one can anticipate these expenses,
a substantial portion can be paid on a pre-tax basis, again saving hundreds or even
thousands of dollars in one’s tax bill.

It is also possible to cover commuting costs to and from work on a pre-tax basis. (Travel
costs to and from medical services are covered under medical benefits.)

The vehicle is called a “flexible spending account,” under which a deduction is made
from one’s paycheck every pay period, before taxes are calculated, and the money placed
in a special account that supports these various types of expenses. These accounts have
proven to be very popular among employees nationwide, especially after the tax law
revisions of 2003, which made the flexibility and coverage of these accounts substantially
greater than they were before.

Participation in such a program is voluntary, and different individuals may choose
different funding levels for their personal flexible spending accounts. Participation in the
program has no effect on other elements of one’s benefit package. Creation of such an
account requires careful planning, however, because the funds deposited in one must be
completely expended over the course of the tax year. Any balance not spent is forfeited.
This aspect of the program leads many people – naturally – to hesitate to make use of it.
However, there is no reason to fall into this trap; after the 2003 tax law change, the
potential coverage from an FSA is extremely broad, and unless one has grossly
overestimated expenses, it is very unusual for one to fail to find beneficial ways to use
the program.

Many people underestimate their annual expenses on medical items. These costs often
come in the form of small co-pays, or in one-time expenses, like glasses or orthodonture,
that may not occur to one as “medical.” One cannot simply “guess” at the appropriate
level for an FSA: before setting up an account, one must review total eligible expenses
over at least the past year before committing to any specific level.

A few details of an FSA plan follow:

      One must be a full-time employee (either faculty or staff).

   Before the beginning of the tax year (January 1) the employee specifies a specific
    level for his/her FSA. That amount is divided by 24 and the result is deducted
    every pay period from one’s before tax income. (For those with bi-weekly pays,
    three pay dates sometimes fall in a single month; in that case, the deduction is not
    made for the third pay.)

   Once the initial FSA commitment is made, the funding level cannot be changed
    during the following tax year.

   For administrative reasons, most plans have a minimum deduction – usually
    $10.00 per pay period, or $240.00 per year.

   Federal law places a maximum of $5,000 on a child-care FSA. Some employers
    create plans with smaller maxima, but there does not seem to be any good reason
    for doing so. However, under federal law, to use a child-care FSA one must be
    either single or married with a working spouse. (If one is married but filing
    separately, one can still use a child-care FSA, but the maximum is reduced to

   There is also a monthly maximum (currently $105.00) on commuter costs that can
    be covered through an FSA.

   The child-care, medical, and commuter FSA programs are separate programs.
    They are similar in scope, but funds cannot be transferred from one to the other.
    Many employers apply the same $5,000 maximum to a medical FSA, although
    there is no Federal requirement that they do so.

   Individuals differ greatly in their tax and spending obligations and one cannot
    generate a single example that will fit every case. On the taxation side, an
    employee with adjusted gross income between $28,400 and $68,800 is in the
    standard 25% marginal tax bracket. Adding the 7.65% social security and
    medicare taxes increases the rate to 32.65%. Thus under the FSA plan, one saves
    a third of out-of-pocket medical, child care, and commuter expenses from taxes.
    Even at the minimum of $240.00, an FSA would save $80 in taxes.

   FSA expenses are not exempt from New Jersey state income taxes, but they are
    exempt from both New York state and New York City income taxes. This
    increases the benefits to New York residents substantially.

   FSA programs are managed by third-party providers. Most of these providers
    have developed user-friendly mechanisms for using FSA accounts, including the
    use of debit cards and making account balances available (securely!) on the web.
    We use TASCONLINE, and reimbursement requests can be made by going to
    www.accesstasc.com. The Bloomfield College Client ID is F548.

Pages 4 and 5 contain worksheets that can be used to estimate the possible benefits from
participation in an FSA. They are only guides, and do not list all possible expense items.
(The last two pages provide more complete lists of medical expense items that are
eligible and that are not eligible.) As a means to gauge your own interest in the program,
you might fill out the sheets to see how large your own benefit might be. If you find
participation to be attractive, please fill out the form provided and return it to Janice

                          EMPLOYEE FSA WORKSHEET

Medical Expenses that could be charged to a medical FSA plan:

   a.   Health insurance deductibles                               $__________
   b.   Co-insurance expenses                                      $__________
   c.   Vision care (eye exams, contact lenses, solutions, etc.)   $__________
   d.   Routine exams (well- visits, etc)                          $__________
   e.   Prescription drug co-pays and over-the counter medicines   $__________
   f.   Wheelchair, crutches, medical appliances                   $__________
   g.   Travel costs related to medical care                       $__________
   h.   Other (lasic, chiro, acupuncture                           $__________

                                                   Sub-Total       $__________

Dental Expenses that could be charged to a medical FSA plan:

   a.   Examination and cleanings                                  $__________
   b.   Braces and retainers                                       $__________
   c.   Fillings, crowns, and bridges                              $__________
   d.   Dentures, including replacements                           $__________
   e.   Implants, inlays, X-rays                                   $__________
   f.   Fluroide treatments                                        $__________
   g.   Other                                                      $__________

                                                   Sub-Total       $__________

                                                   Medical Total$__________

Estimated tax savings from Medical FSA                             $__________

Dependent Care Expenses
Expenses necessary for you and your spouse (if married) to be gainfully employed. You
may put up to $5,000 ($2,500 if married and filing separately) into an FSA account to pay
for day care for dependent children under age 13, for elderly parents, or disabled children
of any age.
                                      Dependent Care Total          $__________

Estimated tax savings from Dependent care FSA                       $__________

Transportation Expenses
Expenses associated with commuting to and from work per year. Includes, public transit
fares, vanpooling and qualified parking. Federal limits apply.

                                     Commute r Expenses Total $__________

Estimated tax savings from Commuter Expenses FSA                    $__________

                                             Total tax savings      $__________

Partial list of the medical expenses that can be covered from an FSA account:

Ambulance service
Birth control pills
Chiropractic care
Childbirth classes;
Co-payments, coinsurance and deductibles (but not premiums); that exceed medical,
   dental, vision plan limits (dollar or visit maximums; out-of-network providers);
Diagnostic tests-health screening
Expenses related to the diagnosis, treatment or cure of a medical condition, mitigation or
   prevention of disease that affects any part or function of the body;
Expenses that are primarily to alleviate or prevent a physical or mental defect or illness;
Expenses that are not reimbursed by FEHB or any other source;
Dental care (including crowns, orthodontic services, implants, oral surgery, periodontal
   services, sealants);
Doctors' fees
Drug addiction/alcoholism treatment
Experimental medical treatment
Eye exams, glasses, contact lenses, including prescription sunglasses;
Guide dogs
Hearing aids;
Home medical equipment (wheelchairs, oxygen, respirators, etc);
Infertility treatments;
Injections and Vaccinations
In vitro fertilization
Laser eye surgery;
Occupational therapy;
Over-the-counter medications;
Prescription drugs;
Preventive care;
Reconstructive surgery after mastectomy
Smoking cessation programs;
Specialized equipment or services for disabled persons (automobile eq uipment, braille
   books and magazines, guide or companion animals, home alert systems for
   visual/hearing impaired persons; note takers or ASL interpreters; tape recorders and
   typewriters for the visually impaired);
Speech therapy,
Transportation expenses related to medical care;
Well-baby and well-child care;
Whirlpool baths (with M.D.’s certification);
Wigs for hair loss from disease (with M.D.’s certification).

Partial list of the kinds of items that cannot be covered from an FS A:

Diaper services
Athletic club expenses
Babysitting to allow time for doctor’s visits
Boarding school fees for a healthy child whose parent is recuperating from a disease
Bottled water
Cosmetic surgery
Cost of divorce (even if recommended by a psychiatrist)
Cost of travel (even if recommended by a psychiatrist or therapist)
Dance lessons
Divorced spouse’s medical bills
Domestic help
Funeral expenses
Illegal operations or drugs
Insurance premiums (health, life, dental, disability, etc.)
Marriage counseling
Maternity clothes
Patent medicine
Scientology fees
Special foods or beverages
Tuition expenses
Veterinary services
Vitamins, tonics, etc.
Weight reduction programs

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