Dependent Care & Flexible Spending Account
The Flexible Spending Account is a fringe benefit plan, which is authorized under the I.R.S. code Section 125. It is a tax reduction plan, not an insurance plan. The Flexible Spending Account allows employees to pay for their entire portion of out of pocket medical expenses on a before tax basis.What is the Dependent Care Account?
The Dependent Care Account is a fringe benefit plan, which is authorized under the I.R.S. code Section 125. It is a tax reduction plan, not an insurance plan. The Dependent Care Account allows employees to pay for all of their child care expenses on a before tax basis up to the cap of $2,500 for single or married filing separate and $5,000 for married.
What can we expect to save with these plans?
On average, the employee savings will be approximately 30% and employer savings 7.65% of the employee contributions for benefits.
Can we implement only one plan without the other?
Yes, the Dependent Care Account can be implemented by itself or in conjunction with POP and FSA. However, a Flexible Account when installed can include FSA and POP.
Do we need a lot of employees in order to benefit?
No. The tax savings are created by employee contributions. As long as the plan does not favor key executives and owners, there is no minimum number of employees necessary in order to have a plan.
What are the benefits of implementing either of these plans?
Since you are reducing an employees gross pay check, you then are giving that employee a raise to their income. This will help retain and hire better quality employees for the employer. You now are able to offer benefits that were once only affordable to the larger size corporations.
Is it required for employees to purchase medical coverage in order to participate?
No. If an employee has coverage elsewhere, he/she may either decline to participate or may participate in any pretax benefits.
If I am enrolled in my spouse’s Cafeteria Plan, can I also enroll with my current employer?
Yes. An employee who is married may participate in both plans.
When can my plan begin?
As soon as you decide to begin saving for yourself and your employees.