Information Package CAFETERIA 125 PLANS

Transcription

1 Infrmatin Package CAFETERIA 125 PLANS Shaffer Insurance Services, Inc. Benefits Divisin 902 E. Ave Q-9 Palmdale Ca Tll Free (866) Office Tel (661) Fax (661)

2 Sectin 125 Cafeteria Plans r als knw as Flexible Spending Accunts (FSA) "Tax Benefit Yu Can't Affrd T Ignre!" Yu can reduce yur taxable incme and avid paying Scial Security and Medicare Tax (7.65%) and Federal Incme Tax (15% t 40%) by enrlling in yur cmpany spnsred Flexible Benefits Plan. These tax savings can apply t ne r mre f the fllwing ptins: 1. Premium Cnversin Accunt allws fr YOUR SHARE f qualifying grup insurance premiums t autmatically be deducted frm yur pay with TAX-FREE dllars. 2. Health Care Flexible Spending Accunt allws yu t pay fr health care expenses fr yurself and yur family which are nt cvered by health insurance including dental, visin, rthdntia, etc. (and even thse deductibles r "c-pays" which are the patient's respnsibility) with TAX-FREE dllars. (The maximum limit is fr the year). 3. Dependent Care Flexible Spending Accunt allws yu t pay fr child day care r dependent care expenses up t $5,000 per year TAX-FREE. Hw yu save taxes... When yu participate in a flexible spending accunt via salary reductin, yu reduce yur federal, FICA, Scial Security, Medicare (and in sme cases, state) taxes and increase yur take-hme pay. The mney that is depsited int yur Flexible Spending Accunt cmes straight ut f yur grss pay, therefre aviding taxes. Shaffer Insurance Services, Inc. Benefits Divisin 902 E. Ave Q-9 Palmdale Ca Tll Free (866) Office Tel (661) Fax (661)

3 The fllwing example shws hw a single persn making $30,000 per year can save$2, in taxes annually by cntributing $403 per mnth t a spending accunt. As yu can see, with nly $403 in mnthly-qualified expenses, by enrlling in the Plan, yu wuld have an extra $241.43/mnth ($2,777.60/year) f spendable incme, the amunt yu wuld therwise be paying Tax Savings in taxes. Illustratin Withut Flexible Benefits Plan With Flexible Benefits Plan Grss Mnthly Salary $2, $2, Qualifying Insurance Premiums Qualifying Health Care Expenses Qualifying Dependent Care Expenses $0.00 $ $0.00 $ $0.00 $ Ttal Qualifying Expense $0.00 $ Grss Taxable Incme $2,500 $2, Incme 13.3% plus 7.65% $ $ Net Spendable Incme $1, $1, Pst-tax Insurance Premiums Pst-tax Health Care Expenses Pst-tax Dependent Care Expenses $ $0.00 $ $0.00 $ $0.00 Ttal Pst-tax Expenses $ $0.00 Net Spendable Incme $1, $1, Increase in Mnthly Spendable Incme Increase in Annual Spendable Incme N/A $ N/A $2, Shaffer Insurance Services, Inc. Benefits Divisin 902 E. Ave Q-9 Palmdale Ca Tll Free (866) Office Tel (661) Fax (661)

4 Premium Cnversin Accunts What is it? Premium Cnversin under Sectin 125 allws yu t avid Scial Security and Federal Incme (withhlding) Tax n yur mnthly deductin fr grup insurance premiums. Hw des it wrk? If yu elect t participate, payrll will adjust yur mnthly deductin fr qualifying insurance premiums frm an "after-tax" t a "pre-tax" basis. There are n frms r claims fr yu t file. What insurance premiums qualify? Premiums fr grup medical, dental, visin, accident and/r disability insurance (Sectin 106). Qualified premiums yu pay fr yurself, spuse and/r dependents. (Please nte that any plicy that builds cash value r allws fr a refund f premium is nt a qualified plan and any disability r salary insurance premium paid pre-tax has a taxable benefit.) Why shuld I participate? Yur withhlding taxes will decrease and yur net take-hme pay (Spendable incme) will increase. Are there any negatives? Because Scial Security tax will nt be deducted frm the amunt used t pay fr qualifying insurance premiums, yur Scial Security benefits may be slightly reduced. Can I revke my premium cnversin amunt? Only if yu have a change in family status during the plan year. If yur grup insurance premiums change, yur deductin will be adjusted autmatically. Hw d I participate? Yur share f ut-f-pcket premiums will autmatically be deducted pre-tax unless yu ntify yur emplyer t the cntrary. Shaffer Insurance Services, Inc. Benefits Divisin 902 E. Ave Q-9 Palmdale Ca Tll Free (866) Office Tel (661) Fax (661)

5 EXAMPLE Jack earns $30,000 annually and his emplyer deducts $200/mnth ($2,400/yr) frm his paycheck t pay the premiums fr cvering his wife and Child under the cmpany's grup insurance plan. Withut Premium Cnversin Grss (taxable) Pay 25% Insurance Deductin Net Take hme $30,000 (7,500) (2,400) $20,100 With Premium Cnversin Grss Pay Pre-Tax Insurance Deductin Taxable Pay 25% Net Take Hme $30,000 (2,400) $27,600 (6,900) $20,700 Jack has increased his take hme pay by $600 per year ($50 per mnth) by participating in his emplyer's Sectin 125 Premium Cnversin Plan. Shaffer Insurance Services, Inc. Benefits Divisin 902 E. Ave Q-9 Palmdale Ca Tll Free (866) Office Tel (661) Fax (661)

6 Hw Spending Accunts Wrk Each year during the pen enrllment perid yu are given the pprtunity t participate in a variety f vluntary benefit prgrams. The Flexible Spending Accunt prgram may be included. If it is and yu decide t participate in it yu will need t: 1. Cmplete an electin frm identifying the amunt f pre-tax salary yu wish t have set aside each pay perid. (This will be giving t the HR persn each New Year). 2. Submit yur signed cmpleted frm t authrize yur emplyer t make yur requested pre-tax deductin. These payrll deductins are placed in yur spending accunt each pay perid during the plan year. 3. When yu incur eligible expenses, yu must submit a claim frm t Shaffer Ins. Services - Benefits Divisin requesting reimbursement f the expense frm yur spending accunt. The claim frm must be accmpanied by dcumentatin (i.e., receipts r Explanatin f Benefit ntices) that identifies yur prvider's name, the dates f the service, a descriptin f the service and/r name f the medicatin and the ttal amunt f yur claim. Yur claims may be submitted any time during the plan year. 4. Fllwing receipt f yur claim fr reimbursement, Shaffer Ins. Services Benefits Divisin will prduce a check fr yu in the amunt f yur claim, using the tax-free mney in yur spending accunt. Yur emplyer may have stipulated a minimum reimbursement amunt whereby the Shaffer Ins. Services - Benefits Divisin will nt issue yu a check until the minimum has been reached. Hw t File an FSA (Flexible Spending Accunt) Claim Fllw these easy steps t file a claim fr reimbursement: 1. Obtain a receipt fr services frm yur prvider, r an Explanatin f Benefits (EOB) frm yur insurance cmpany. 2. Ensure the service is an allwable expense 3. Fill ut a Shaffer Ins. Services, Inc. - Benefits Divisin Claim frm (lcated n ur website, 4. Make a cpy f yur receipts 5. Either mail r fax the claim frm and the cpy f yur receipts t Shaffer Ins. Services Inc. - Benefits Divisin, Inc. But please d nt d bth. Shaffer Ins. Services, Inc. Benefits Divisin must receive yur claim at least 5 days prir t yur cmpanies scheduled pay perid. Special check issuance is available, but authrizatin must be given by yur cmpanies HR cntact. Day Care Spending Accunt What is it and wh is eligible t participate? The Dependent Care Flexible Spending Accunt under IRC Sectin 125 allws yu t avid bth FICA (7.65%) and Federal Incme Tax (11%, 13%, 14%) n qualifying child and dependent care expenses. Shaffer Insurance Services, Inc. Benefits Divisin 902 E. Ave Q-9 Palmdale Ca Tll Free (866) Office Tel (661) Fax (661)

7 In rder t participate in this plan, yu, the emplyee, and yur spuse, must meet the fllwing: The care fr which yu are paying must be fr ne r mre qualifying dependents. Yu must keep up a hme that yu reside in with the qualifying dependent(s). Yu must have earned incme during the year unless yur spuse is a full-time student is unable t care fr himself/herself. Yur dependent care expenses must be incurred s that yu can wrk r lk fr wrk. The payments yu make fr dependent care must be t smene yu r yur spuse cannt claim as a dependent. Yur care prvider must be identified n yur tax return when yu file yur federal incme tax. When filing yur incme tax, yur filing status must be single, head f husehld, qualifying widw(er) with dependent child, r married filing jintly. Yu must file a jint return if yu are married r meet the "Jint Return Test" rule described in IRS Publicatin "Child and Dependent Care Expenses." What dependents are eligible under this plan? Yu re dependent under age 13 whm yu can claim as a dependent fr incme tax purpses. Yur spuse wh is physically r mentally unable t care fr himself/herself. Yur dependent wh is physically r mentally unable t care fr himself/herself, and fr whm yu can claim as an exemptin fr incme tax purpses. Yur child even if yu cannt claim him/her as an exemptin n yur incme tax, if yu are divrced r separated and yu are the custdial parent. Yu are cnsidered divrced r separated if either f the fllwing applies: 1. Yu are divrced r separated under a decree f divrce r separate maintenance r a written separatin agreement, r 2. Yu lived apart frm yur spuse fr all f the last 6 mnths f the year. Hw much can I have withheld frm my paycheck as a participant? Pre-tax reimbursements f qualified dependent care expenses cannt exceed a certain amunt during the plan year, and the maximum is the lwest f the fllwing: Yur earned incme (including self-emplyment wages) fr the plan year; Yur spuse's earned incme fr the year; r $5,000 ($2,500 if married and filing separate incme tax returns) There is a special rule in the case f spuses wh are full-time students r physically r mentally unable t care fr themselves. If yur spuse meets either criteria, yu may cntribute up t $2,400 per plan year if yu have ne dependent, r up t $4,800 if yu have tw r mre dependents. Shaffer Insurance Services, Inc. Benefits Divisin 902 E. Ave Q-9 Palmdale Ca Tll Free (866) Office Tel (661) Fax (661)

8 If yu and yur spuse participate in separate dependent care spending accunts... The maximum yu may cntribute t bth plans is a cmbined $5,000. Fr purpses f this plan, a persn is cnsidered married if he r she is married at the end f the plan year. Hw d I get reimbursed fr eligible Day Care expenses? The IRS regulatins require yu t prvide: The date(s) care was prvided r incurred. The cst f the care. Yur care prvider's name and tax ID number. A signed receipt r invice frm yur prvider. A cmpleted frm requesting reimbursement that is submitted t yur Dependent Care Flexible Spending Accunt administratr. Yu must als file IRS Frm 2441 with yur federal tax return at the end f the year t reprt yur dependent care prvider(s) tax ID number(s). Otherwise, the IRS may declare yur reimbursements as taxable incme. Shaffer Insurance Services, Inc. Benefits Divisin 902 E. Ave Q-9 Palmdale Ca Tll Free (866) Office Tel (661) Fax (661)

9 Flexible Spending Accunt Wrksheet fr Emplyees Pay Check Deductins: Medical Expenses: (Estimate yur uninsured medical csts per year) Insurance Deductibles Insurance C-payments Dental Deductibles Dental Expenses Visin Deductibles Visin Expenses Hearing Expenses Prescriptins Medically required equipment Chirpractic Other Medical Expenses TOTAL COST: Prjected Expenses Individually Owned Health Insurance: (Enter the annual premium amunt f any f the fllwing insurance plans that yu r yur dependents individually wn) Dental Insurance Visin Insurance Cancer Insurance Intensive Care Insurance Accident Insurance TOTAL COST: Ttal Deductins: Shaffer Insurance Services, Inc. Benefits Divisin 902 E. Ave Q-9 Palmdale Ca Tll Free (866) Office Tel (661) Fax (661)

10 BENEFIT ELECTIONS FORM AND SALARY REDUCTION AGREEMENT Emplyer Name Emplyee Name (Last, First, MI) Scial Security N. Emplyee Street Address address City, State, Zip Cde I hereby authrize and direct my emplyer t reduce my salary by pay perid in the amunt specified t pay fr the cverage s shwn under the Premium Cnversin and Reimbursement Accunts headings shwn belw. Such reductins, cnsidered as elective cntributins under the plan, will start with my first paycheck dated after the effective date f the Plan. I further authrize future adjustments in the amunt f the salary reductin in the event that the cst f cverage in any prgram selected belw under the heading PREMIUM is changed by the carrier during the plan year. I als understand that the purpse f this prgram is t allw emplyees t select their qualified benefits within the guidelines f the Internal Revenue Cde. I understand that the selectin f a benefit and the indicatin that a premium is t be paid des nt necessarily include me in the insurance prtins f this plan. In mst instances an applicatin fr insurance must als be cmpleted. Listed belw are the benefits that may be available under the plan. Please indicate which benefits yu wish t select by cmpleting the reductin per pay perid cst. These selectins will remain in effect until a subsequent electin frm is filed, in accrdance with the plan. Salary Reductin Amunt per Pay Perid Premium (Health Insurance) (Emplyer/Emplyee prtin) Nt Reimbursed (Such as: Blue Crss, Health Net, Kaiser, Delta Dental) Medical... $ Dental... $ Visin... $ Per pay perid Pretax Deductin fr Insurance Premiums Reimbursement Accunts FSA Medical Expenses... $ FSA Child Care... $ $ Per pay perid Pretax Deductin fr Reimbursement Accunts... $ Ttal Deductins per pay perid...$ Starting Pay Date: This electin frm will remain in effect and cannt be revked r changed during the plan year, unless the revcatin and new electin are n accunt f and cnsistent with a change in family status. Authrize: I hereby certify the abve infrmatin t be crrect and true and chse t participate. Signature Date Decline: The benefits f the plan have been thrughly explained t me, but I chse nt t participate. Signature Date Shaffer Insurance Services, Inc. Benefits Divisin 902 E. Ave Q-9 Palmdale Ca Tll Free (866) Office Tel (661) Fax (661)