Should We Establish a Flexible Benefit Plan?
Q: We enjoy a fairly rich set of benefits, with a high level medical plan and dental. Will offering FSAs still prove of value for our employees?
A: Looking at dependent care FSAs first, any employees with qualifying day care expense can greatly benefit. It is not unusual for families to be spending $5,000 or more for childcare. Sheltering $5,000 from taxation is of great value—even for one participant.
A: On the medical FSA side, employees are always surprised when they take a few moments to consider the level of out of pocket expenses they and their families have in a year. Prescription co-payments; dental co-payments and plan maximums; vision expenses and health plan deductibles add up quickly. It is not unusual for these qualifying expenses to exceed $500 annually. Employees with families can average $800 to $1,000 or more in such expenses.
Q: We started a firm several years ago with a few principals; now we have ten employees. Will a medical/dependent care Flexible Spending Account program prove too expensive for us?
A: Expense should not be an issue. First, these programs are employee funded via pre-tax payroll contributions. Next, monthly administrative charges (typically borne by the employer) are modest. Next, dollars contributed by participants are excluded from taxable wages for employer FICA purposes.
Most employers experience little or no net costs in starting and operating these plans.
Q: In the fall, we are quite busy working with our advisors on benefits renewals/costs and employee benefit changes—and communications for our January 1st plan changes to our employees. What are the timing and other implications of starting up Flexible Spending Account programs?
A: At INNOVA, we have a “quick-start” approach to initial plan set-up. We can work with your broker or consultant for needed census data. After a brief consultation, we will provide a signature ready plan document and SPD for the plans. We can determine how to enroll your participants, whether on-line; or via hard-copy forms and whether to integrate enrollment with other annual benefit elections.
Additionally, INNOVA offers a proprietary service, flexGuide©, to your employees that provides no-cost guidance sessions (one-on-one), reviewing with them their individual circumstances in order to determine a level of funding that is reasonable. (Guidance Session). These are conducted with our professional staff.
Timing-wise, we have successfully helped firms start January plan year programs as late as mid-December.
Q: I have heard that certain owner-employees may not benefit from flexible spending account programs. Can you elaborate on that?
A: Yes, depending upon the type of entity, owner-employees may not participate in an FSA. However, their employees may still participate. Typically, partnerships and corporations which are set-up under partnership rules have limited benefits for owners. In addition, more than 2% shareholders in a Sub-S Corporation may not participate.
Q: Ok. What kinds of businesses would wish to defer setting up FSA programs?
A: Start-up firms that are staffed entirely with owner-employees and no (or few) non-owner employees. Recall, however, that one non-owner employee with significant day-care expenses can benefit substantially---likely enough to justify a plan.
Q: As a smaller entity, we are not staffed with dedicated HR or benefits professionals. Does setting up an FSA program add administrative burdens?
A: FSA programs are driven from payroll deductions. Most periodic data needed for information can be coordinated through your payroll company or your manager who handles payroll. The reporting to us is routine and we do the reconciliation work. This should not be a concern. We are also staffed to handle participant questions.
Q: We are in constant competition to recruit and keep our best and brightest staff. What other types of entities offer these benefits?
A: Virtually all mid-size and larger employers offer FSAs to their employees, for the reasons noted. Adding FSAs can be a great way to add value to your benefit program at little or no cost.
Q: Who do I need to involve to further evaluate FSA plans for my company?
A: A quick conference call with your broker/consultant and INNOVA staff can get your questions answered and the limited plan design considerations established. We can have your plan documents assembled in as little as a week—and a plan for communications and enrollment set in the same timeframe. We can also similarly launch our toll free flexGuide© services to your employees to get them underway and comfortable.
Q: Who is INNOVA BENEFIT Services, LLC?
A: INNOVA is an organization of committed professionals working together towards a common mission: to build long-term relationships with our clients by providing superior service, quality products and innovative solutions. Through this mission, we seek to exceed expectations and provide personalized services you seek for your organization and its employees. We have our Eastern administration center in the Pittsburgh suburb of Plum. We also have a center in San Jose, CA. We serve as administrator for the Pittsburgh Technology Council and we are an endorsed provider to PTC Members. We can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it or 866-993-7702.