This introductory post is Part One of a three-part series on the topic of Sterling’s new Flexible Benefit Plans. Part One features an introduction to and an overview of Flexible Benefit Plans. Part Two discusses advantages of Flexible Benefit Plans to employees and employers and why Sterling is a provider of choice. Part Three addresses frequently asked questions regarding Flexible Benefit Plans.

Introduction

Starting in August 2010, Sterling Health Services Administration is pleased to introduce our new Flexible Benefit Plans as part of our ongoing efforts to make Sterling your one-stop-shop for account based consumer directed services.

Flexible Benefit Plans can help employers contain benefit costs, meet diverse employee needs, and increase employee satisfaction. In addition, like HSAs and HRAs, Flexible Benefit Plans generate substantial tax savings for both employers and employees.  And FSAs can be established without a health insurance plan.

The new Flexible Benefit Plans from Sterling include:

•    Healthcare Flexible Spending Account (FSA)
•    Dependent Care Flexible Spending Account (FSA)
•    Transit & Parking Benefits

Healthcare Flexible Spending Account (FSA):

The Healthcare FSA allows employees to be reimbursed for medical expenses not covered or reimbursed by other insurance and consumer directed account based plans like HSAs and HRAs.  All expenses must be qualified medical, vision, pharmacy or dental benefit expenses.

The new healthcare reform law includes a change in how funds in an FSA can be used. Beginning in January 2011, expenses incurred for over-the-counter medications will no longer be eligible for payment or reimbursement from healthcare accounts. However, the law still allows over-the-counter medicines for which the patient has a doctor’s prescription to be reimbursed from these accounts.

All medical care expenses must be incurred during the plan year and the “use it or lose it” rule applies to any funds not spent before the end of the plan year.

The healthcare reform law imposes a new annual limit on contributions made to Healthcare FSAs. Effective 2013, the legislation limits contributions to no more than $2,500 annually. Currently, contribution amounts are set by employers with no federally imposed limit.

Dependent Care Flexible Spending Account (FSA):

The Dependent Care FSA allows employees to accumulate pre-tax funds to reimburse for childcare expenses or day care expenses for a disabled or elderly/disabled dependent while they are employed.

In order for a dependent care expense to be reimbursed, it must be necessary for the employee to remain gainfully employed and therefore incur the expense as a way of caring for the dependent while also working.

Paying for dependent care expenses with pretax dollars may provide substantial tax savings.

Under current regulations, the IRS limits the maximum annual amount you can deposit in your Dependent Care account to $5,000, or $2,500 if you are married and filing separately. Dependent Care FSAs also are covered by the “use it or lose it” rule.

Transit & Parking:

Employees are allowed to set aside pre-tax compensation for qualified commuter expenses that generally include payments for the use of mass transportation – train, subway, bus, transportation in a commuter highway vehicle, transit passes, and qualified bicycle reimbursement – and for parking.

Employees elect to set aside a certain amount of pre-tax salary to cover qualified costs incurred in commuting to work. The employee will designate an amount for mass transit expenses and a separate amount for parking expenses. Separate reimbursement accounts are maintained for transit and parking and funds cannot be commingled or transferred between accounts (for example, amounts cannot be transferred from the mass transit to the parking account).

As expenses are incurred during the year, a request form may be submitted to the employer for reimbursement. If the employee does not use the full amount before the end of the plan year, the left over amount is carried forward to the next plan year.

Transit and parking maximum contributions are set by the IRS. In 2010, the limits are $230 monthly for transit and $230 monthly for parking. The bicycle commuting limit is $20 monthly. As of this date, the limits for 2011 have not been set.

Parts Two and Three on the topic of Sterling Health Service Administration‘s new Flexible Benefit Plans will be published this week.