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Cafeteria Plans

In 1978 the IRS established regulations, Code Section 125 “Cafeteria Plans”, to allow employees to be reimbursed for certain healthcare and dependant daycare related expenses on a BEFORE tax basis. Before Federal Income taxes, before FICA taxes, and before State Income taxes (in most states). This means employees can save 25% to 50% on qualified reimbursements.

Example: Using a $1,000 annual contribution in a Flexible Spending Account:

       FICA Tax              7.65%         $ 76.50
       State Tax             7.00%         $ 70.00
       Federal Tax         15.00%       $ 150.00
                                                   $ 290.65

For every $1,000 that an individual puts into their FSA, they save $290 in taxes!

Flexible Spending Accounts allow employees to have their compensation reduced by an amount necessary to cover certain fixed benefit costs and non-fixed benefit costs with pre-tax dollars rather than after-tax dollars. Eligible benefit costs include dependent care, dental care, vision care, other services not reimburse by the regular health plan, etc. Both the employer and the employee receive substantial tax savings.

Our consultant services are available to assist you in designing a Flexible Benefit Plan best suited to your individual needs. Interactive Medical Systems can administer your Flexible Benefit Plan without any changes in your health care administration or changes in your current benefits.

Following are some commonly asked questions regarding Flexible Benefit Plans

Q: How will I know the balance in my Flexible Spending Account?
Interactive Medical Systems will print your available balance on the Explanation of Benefits (EOB) attached to any reimbursements that you receive. You may also call the IMS Flex department at (919) 877-9933 or (800) 426-8739 to check your outstanding balances. Participants in the Flex Convenience® debit card program can check their account balances online at https://www.mywealthcareonline.com/imsflex/

Q:  Can I change my elections in the Section 125 plan at anytime during the plan year?
No. You cannot change your elections during the plan year, except in the event of specified status changes. The following events are considered eligible status changes; however, your election change must be consistent with the status event:

Legal marital status; Number of dependents; Employment status; Dependent satisfies or ceases to satisfy eligibility requirements; Judgment or Order to cover a child; Entitlement to Medicare or Medicaid benefits. Unless you are subject to one of these qualifying events, your election is irrevocable for the plan year. If you experience one of the changes noted above, you are allowed to modify your election within 30 days of the event.

Q: Can I submit a claim after the plan year ends?
You will have a period of time after the end of the plan year to submit claims that were incurred during the plan year. Your Plan Summary will indicate the exact amount of time your plan allows. The expense MUST be for services performed during the plan year.

Q: What form do I use to file a claim?
Your employer has a supply of claim forms you can use when you have a claim to be submitted. You can also download a claim form via our website. Simply complete the form and read the claim-filing instructions on the reverse side of the form to ensure your claim is properly submitted. If the expense is qualified under the Plan and appropriate documentation is submitted, you will receive a reimbursement check.

Q: How and when can I submit a claim?
You can fax the claim and the appropriate claim substantiation information to IMS at (919) 562-0021 or it can be mailed to IMS at PO Box 1349, Wake Forest, NC 27588 any time during the plan year.

Q:  What happens to the funds I set aside?
If you participate in both the healthcare and dependent care FSAs, the funds you set aside are deposited into two separate accounts -- one for out-of-pocket eligible health care expenses and one for dependent care expenses. The money allocated for your Health Care Spending Account is available for immediate reimbursement up to your annual election amount. Dependent Care Spending Account dollars are reimbursed as they accumulate in your account; simply submit the required documentation. You cannot transfer or "borrow" funds from one account to the other.

Q: What happens if there is money left in my account at the end of the year and I have no more reimbursable expenses?
Under IRS regulations, the money in your account will be forfeited and will be used to pay for administration costs of this Plan. This is known as the "use it or lose it" feature of an FSA. For this reason, you need to make conservative estimates of your reimbursable expenses prior to each plan year. You have a grace period at the end of each plan year in which to file claims for expenses incurred during the plan year.  Note: An expense is “incurred” when the participant is provided with the medical care that gives rise to the medical expenses, or provided with the dependent care services and not when the participant is formally billed or charged for, or pays for, the medical care, or dependent care services.

Q: What happens if I leave my employment during the plan year and have money left in my account(s)?
See your Human Resources Department for specifics regarding COBRA continuation of your Health Care FSA. The Dependent Care FSA is not eligible for COBRA continuation. If you choose not to participate in COBRA, any funds remaining in your Health Care FSA will be forfeited if you do not have sufficient eligible expenses incurred prior to termination.

Q: If I participate in the Plan, will I reduce my Social Security benefits when I retire?
Since your taxable income will be reduced, your FICA contribution for Social Security could also be slightly reduced. Usually the effect will not be great over the lifetime of your covered earnings. Check with your local Social Security office for possible impacts based upon your particular situation.