Employers know an attractive benefits package is important to entice and retain high quality job candidates. For businesses evaluating which benefits to offer, a Flexible Spending Account (FSA) plan can be a cost-effective way to provide value for both employers and employees.
What is an FSA?
An FSA is an employer-owned savings account where employees deposit income on a pre-tax basis to pay for out-of-pocket health and dependent care expenses. Employees choose an annual dollar amount to contribute to their FSA ($2,700 per year maximum), and any money added to their account is untaxed. Unlike a Health Savings Account (HSA), employees can access their entire annual FSA contribution amount at the start of the plan year, however, they must continue to fund their FSA to pay back what they have used. FSA funds do not roll over into the next year and transfer to the employer if unused. Employers can institute a “grace period” of up to two and a half months into the next year allowing employees to claim any remaining FSA funds. They can also offer a carry-over amount for unused funds, up to $500, that employees may keep for the following year, with the remaining balance belonging to the employer.
Why Offer an FSA?
Employees save a significant amount on taxes from FSAs. Additionally, when employees reduce their taxable income, it reduces the amount employers must match toward their employees’ FICA tax liabilities, lowering their overall tax obligation. FSAs also allow employers to keep any unused funds after the plan year’s end (excluding carry-over amounts and balances covered under grace periods). And as the name would suggest, FSAs are just that: flexible. As long as an employer has an FSA plan, an employee can open an FSA with or without a high deductible health plan (HDHP).
As one of the first third-party administrators of Flexible Spending Accounts in the nation, BASIC has cultivated industry leading best practices that focus on technology, compliance, and exceptional service. BASIC FSA plans come with everything you need, including a customized Plan Document, Summary Plan Description (SPD), an administration manual, and essential compliance services like IRS Form 5500 filing and non-discrimination testing. Our goal is to help design a plan that works best for you, whether we are helping you establish a new plan or taking over administration for an existing plan. Our FSA plans include a convenient no-cost benefits debit card and access to our mobile app and online portal. But those aren’t the only ways BASIC sets its FSA plans apart. Claims can be submitted many ways including the online portal or the BASIC app, and unlike many third party administrators that only process claims semiweekly, BASIC processes claims every day with no minimum claim amount! To see how BASIC can help provide an FSA plan that’s right for you, request a proposal today!
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