TAX SAVER ENROLLMENT PACKET - 2017 Plan Year A Tax Saver Election Form must be received by 12/9/2016 in order to participate in Tax Saver for the 2017 plan year. NOTE: Employees on the HSA medical plan may only sign up for the Tax Saver Dependent Care Account. Save money on your medical, dental and prescription expenses with the Tax Saver program! Look inside this packet to read about all the advantages of the Healthcare and Dependent Care Tax Saver programs and how it can help you increase your buying power. TABLE OF CONTENTS What is the Tax Saver Program? 2 How Tax Saver Works 2 Step I: Your Options 3-4 Step II: Determining Your Reimbursable Expenses 4 Out-of-Pocket Eligible Medical Expenses 5 How to File for Reimbursements 6 IRS Rules and Regulations 7 Questions and Answers 8 Please call the Human Resources Benefits office if you have any questions: Denise Childs 972.216.6463 Jennifer Weldon 972.216.6430 Brandi Odom 972.216.6742 benefits@cityofmesquite.com Fax: 972-216-6334
What is the Tax Saver Program? The Tax Saver program allows you to save money in a pre-tax spending account. You can use this money on eligible out-of-pocket medical expenses for you, your spouse and any of your qualified tax dependents. Tax Saver Benefit Accounts Section 125 Sometimes referred to as a cafeteria plan, flex plan or a Section 125 plan, Tax Saver lets you set aside a certain amount of your paycheck into accounts before paying income taxes. During the plan year, you have access to your accounts for reimbursement of expenses you incur, such as health care and/or day care. Accounts for healthcare are kept separate from dependent care accounts and cannot be interchanged throughout the plan year. Reimbursable expenses can include: Dental Services and Orthodontics Expenses not covered by insurance Eyeglasses, contacts, solutions and eye surgery Drugs (prescription and non-prescription with letter from provider) Adult and Child Care Services When you use tax-free dollars to pay for these expenses, you realize an increase in your spending power and substantial tax savings. How Tax Saver Works Example: Elizabeth and Gregory Smith earn $40,000 combined income per year. They are in a 32% tax bracket for Federal, State, FICA and Medicare taxes. The Smith family spends $800 per year in medical care expenses for deductibles, eyeglasses and dental visits. The Smiths also have a daughter in day care. They spend $75 per week, or $3,900 per year, on childcare expenses. By using Tax Saver, Elizabeth and Gregory s spendable income increases $1,504 per year because less tax is withheld. Without Tax Saver With Tax Saver Combined Gross Annual Salary $40,000 $40,000 Pre-Tax Medical Care Expenses - -800 Pre-Tax Dependent Care Expenses - -3,900 Taxable Income $40,000 $35,300 Income Taxes (at 27%) -10,800 (at 25%) -8,825 After-Tax Medical Care Expenses -800 - After-Tax Dependent Care Expenses -3,900 - Spendable Income $24,500 $26,475 INCREASE IN SPENDABLE INCOME: $1,975 Page 2
Step 1: Your Options Insurance Account This account allows your medical and dental premiums to be deducted from your pay on a pre-tax basis if you are covered under: the City s medical and/or dental insurance plans or the Voluntary Critical Care (cancer) insurance Employees are automatically enrolled in this option. Healthcare Reimbursement Account This account reimburses you for eligible health care expenses not covered by insurance. You set aside money, TAX-FREE, through regular payroll deductions. During the year, you can be reimbursed directly from your account for those qualified health care expenses not covered by insurance. You do not have to pay a bill for it to be reimbursed. You can bring the invoice to the HR office to submit the claim to be reimbursed on your paycheck. Common expenses that qualify are: Deductibles Co-payments Ambulance Fees Lab Fees Non-covered Medical and Dental Expenses Vision expenses - eye exam, glasses, contacts, contact solution (However, you cannot submit receipts for vision expenses that were reimbursed under the City s Vision Insurance Plan.) Prescriptions For a full list of eligible medical expenses that can be submitted for reimbursement, please stop by the HR Benefits office. Note: The City s Healthcare Reimbursement Tax Saver Program has been amended to reflect the IRS ruling allowing a carryover provision of up to $500. This provision allows Healthcare Reimbursement Tax Saver participants to carryover up to $500 for the following year s healthcare expenses. The carryover of up to $500 will not count against the $2,550 maximum permitted. The carryover provision only applies to Healthcare Reimbursement and does not apply to Dependent Care Reimbursement. Note: The Maximum Annual Election is $2,550, per the Internal Revenue Service (IRS). The amount of money you elect for your Medical Reimbursement Plan for the year is available to you for qualified medical expenses which you incur while you are participating with a contribution to the plan. NOTE: Employees on the HSA medical plan may NOT sign up for the Health Care Reimbursement Account. Page 3
Dependent Care Reimbursement Account This account reimburses you for day care expenses for eligible children and adults. You set aside money, TAX-FREE, through regular payroll deductions. After payroll deductions are on deposit, reimbursements will be on your next check when you submit all required documentation by the payroll deadline. (Only money accumulated into the account will be paid out at the time of claim - no advance payments) To qualify: 1. If married, both parents must be employed 2. Dependent child must be under 13 years of age or a child, spouse or other dependent who is physically or mentally incapable of self-care and spends at least eight (8) hours a day in your household. Qualified expenses for reimbursement include - adult and child day care centers, preschool and before/after school care. The Maximum Annual Election is: $5,000 - Single or Married Filing Jointly $2,500 - Married Filing Separately Please Note: If your family's annual income is over $20,000, this reimbursement option will most likely save you more money than the dependent care tax credit you take on your tax return. You will also receive your tax savings throughout the year, rather than once a year when you file your taxes. Reimbursement forms are in the HR Office. You may submit requests for reimbursement for Dependent Care claims until June 15 of the following year. Dependent care expenses must be incurred during the plan year and grace period January 1 - March 15. Step II: Determining Your Reimbursable Expenses Health Care Expenses TOTAL: (Medical, Vision & Hearing, and Dental) $ For Election Form: Divide by 26 paychecks you receive each year Dependent Care Expenses TOTAL: (ADD ALL MONTHS) $ For Election Form: Divide by 26 paychecks you receive each year Page 4
Out-of-Pocket Eligible Medical Expenses The following medical expenses are eligible to be reimbursed under this program. This list is not all inclusive. If you have a questions on whether an expense is eligible to be paid through this program, please call the HR Benefits office at 972-216-6463. Acupuncture Alcohol/drug addiction recovery Ambulance Artificial limbs Artificial teeth Birth control Braces Braille-books and magazines Care for mentally handicapped child Childbirth classes Chiropractic fees Co-insurance Contact lenses and solution Costs for physical or mental illness confinement Crutches Deductibles Dental fees Diabetic supplies Diagnostic fees Drugs (prescribed) Dyslexia, language training Eyeglasses and exams Fertility enhancement Handicapped person's special school Hearing device and batteries Hospital care (medical services) Iron lung Laboratory fees Laetrile, legal use (prescribed) Laser eye surgery Life fee to retirement home for medical care Massage therapy (prescribed treatment) Medical Conferences Medications for smoking-cessation Nurse's fees Nurse's services, domestic Obstetrical expenses Operations, legal Optometrist fees Orthopedic shoes Orthodontia costs Osteopath fees Oxygen equipment Physician fees Prescription drugs Prosthesis Psychiatric and Psychologist fees Radial keratotomy surgery Remedial reading (neurological) Routine physicals and other non-diagnostic services or treatments Service animal, seeing eye dog for the blind or deaf Sexual dysfunction treatment Special communication equipment for blind or deaf Special education for blind or deaf Special plumbing for handicapped Speech therapy Sterilization operation, legal Stomach and digestive relief medicines Surgical fees, legal Television decoder, closed caption Therapy treatments Vasectomy Viagra Weight loss programs for a specific diagnosed illness Wheel chair X-rays NOTE: Over-the-Counter (OTC) medicines, drugs, and biological treatments without a prescription or letter from a provider are ineligible items for reimbursement. Page 5
How To File for Reimbursements For eligible expenses covered by your insurance: Step 1: Health Care Submit the appropriate claim forms to your medical plan (if applicable). After you receive the Explanation of Benefits (EOB) from your medical plan provider, attach your EOB to a completed Tax Saver claim form. Send the completed claim form to the Human Resources Benefits office. You will be reimbursed for any eligible expenses not covered by your medical plan up to your elected amount. For eligible expenses not covered by your insurance or for expenses where an EOB is not provided: Attach an itemized bill/receipt to your completed Tax Saver claim form that includes the date of service, name and address of the provider, a description of the service and the amount charged. Send the completed claim form to the Human Resources Benefits office. You will be reimbursed for any eligible expenses up to your annual elected amount. Important information: You may only submit receipts for services incurred during the plan year and while you were a participant in the plan. An expense is incurred when a service is received, not when the bill is paid. Credit card receipts and/or cancelled checks are not considered appropriate documentation. Step 2: Dependent Care Complete the dependent care portion of the claim form in its entirety. Include the amount paid and date(s) of service. You must include your provider s name and signature. If you do not have your provider s signature a receipt must be attached. Send the completed claim form to the Human Resources Benefits office. You will be reimbursed for eligible expenses up to your account balance. Important information: You cannot be reimbursed for any part of a dependent care claim that exceeds the balance in your account. If your claim exceeds the balance, you will be paid the remainder as money accumulates in your account. You may only submit receipts for services incurred during the plan year, grace period, and while you were a participant in the plan. An expense is incurred when a service is received, not when the bill is paid. Step 3: Deadlines Last Day to File for Reimbursements: For Health Care Reimbursements: If you are enrolled on the last day of the year (December 31) and you do not use all the money in your healthcare account by December 31 or file for reimbursement with the Human Resources Benefits Office by March 31 of the next year, the plan will carryover up to $500 of your balance, for you to use for the next year s health care expenses. For Dependent Care Reimbursements: If you are enrolled on the last day of the year (December 31), you have an extended grace period from January 1 through March 15 when you can incur expenses and use up funds from the previous plan year. The Human Resources department must receive your claims no later than June 15 after the end of the year. HR will pay any claims incurred during the grace period from the previous year s funds. As per IRS regulation, if you don t file claims by June 15, your account will be closed and any balance remaining will be forfeited to your plan administrator, the City of Mesquite. All Tax Saver reimbursements will be included in your next paycheck, providing you turn in your forms by the Friday before payroll. Page 6
IRS Rules and Regulations 1. Open enrollment is held annually for you to elect the benefits you wish to participate in during the following plan year. 2. After the plan year starts, you cannot change your elections unless you experience a "Status Change" (see below). 3. Your election must stay the same for the full plan year, unless there you have a qualifying event, also known as a change in status. A qualifying event is defined as: Change in your legal marital status Change in number of your dependents Termination or commencement of employment by you, your spouse, or your dependent(s) Change in your work schedule (such as, from full-time to part-time) Your dependent satisfies (or ceases to satisfy) dependent eligibility requirements Change in residence or worksite of you, your spouse, or your dependent(s) 4. The expenses you elect to pre-tax through your Reimbursement Plan must be incurred (the services rendered) while you are actively participating in the plan with your contributions. You have 90 days after the end of your deadline/grace period for the plan year to file any claims you incurred within that plan year. 5. The expenses you elect to pre-tax through your Reimbursement Plan cannot be reimbursed by any other source, i.e., paid by your Insurance Company. 6. The expenses you elect to pre-tax through your Reimbursement Plan CANNOT BE DEDUCTED on your personal income tax return. 7. For Health Care Reimbursement, funds up to $500 that have not been used by March 31 will rollover for you to use for the next year s healthcare expenses. Any funds over $500, under IRS rule, will be forfeited back to your employer s health plan expenses. 8. For Dependent Care Reimbursement, any money not used during the plan year and grace period and not claimed by June 15th cannot be refunded to you, under IRS rules, and will be forfeited back to your employer's health plan expenses. 9. Maximum day care expenses allowed for the plan year are $5,000 per family unit. 10. Maximum Medical expenses allowed for the plan year are $2,550. Your reimbursements will be included in your next paycheck, providing you turn in reimbursement forms the Friday before payroll. 11. Medical Expenses not eligible to be paid pre-tax through the Reimbursement Plan include: Cosmetic medical expenses (elective plastic surgery, hair transplants,, teeth-whitening, etc.) Face cream, suntan lotions, moisturizers Marriage or family counseling Vitamins Over-the-counter drugs, medicines, and biologicals without a note or letter from a provider A full list can be provided by the HR Benefits Office. 11. The Grace Period rule ONLY applies to Dependent Care Reimbursement. It allow participants an additional two and half months each year to incur claims before the unused amount is lost. Claims can be incurred through March 15. Participants will have until June 15 to file claims through the HR Benefits Office. Page 7
Questions and Answers Who is eligible? The Tax Saver Program is available to all regular, full-time employees. When can I enroll? You may enroll in the Tax Saver program during Annual Open Enrollment or as a new hire. What is a Reimbursement Account? A benefit provided by your employer that lets you set aside a certain amount of your paycheck into an account before paying income taxes. Then, during the year you can be directly reimbursed from your account for qualified health care and day care expenses. Why should I participate in the Healthcare Reimbursement Account when I already have health insurance? This account is used to pay for expenses not covered by insurance. For example, deductibles, co-payments, eye exams, glasses, orthodontics, drugs and hospital care, to name a few. What is the difference between an Health Savings Account (HSA) and the Tax Saver program? The main difference is that Tax Saver is a use-it-or-lose-it program and an HSA is not. If I set aside part of my pay, won't I make less money? No. Your net take-home pay will actually increase by the amount of taxes you did not pay. An example of how it may work for you is detailed in the enrollment information. Can I change the contributions to my Tax Saver Reimbursement contributions during the year? Once enrolled, you cannot change your annual contribution election unless you experience a qualifying event or change in status, such as marriage, divorce, birth or adoption of a child, death of a dependent, or a change in your or your spouse s employment status. What if I currently take the dependent care credit on my annual tax return? If your family income is over $20,000, you will most likely benefit from the Tax Saver plan rather than taking advantage of the current income tax credit. The amount you deposit in your Dependent Care Reimbursement Account reduces the amount, dollar for dollar, that you can claim as a credit on your tax return. Are there any negatives that I should know about? Yes. Because you are not paying any social security taxes on that portion of your income going into a Tax Saver Reimbursement Account, your Social Security benefits may be slightly reduced. Do I have to wait for the money to be deposited in my account in order to make a claim for reimbursement? The annual amount you have allocated for the Healthcare Reimbursement Account is available to you at any time throughout the plan year. The amount available to you from your Dependent Care Reimbursement Account is the amount you have contributed to date. How do I know how much is available in my accounts? You will be sent notification of your account balance periodically during the year. What happens to my accounts if I terminate my employment? You will be able to request reimbursement for health care and day care expenses that you incurred prior to your termination date or the Tax Saver Plan date up to three months after termination. What if I don't use all of the money I set aside in my accounts? Carefully review your estimated expenses before making the decision to participate. Any contributions that are not used during the plan year CANNOT be paid to you in cash or used in a later plan year. Please see page 7 for information about the Grace Period rule. What if I am not covered under my company's medical plan? Good news! You and your family can still participate in the Healthcare or Dependent Care Reimbursement Accounts. How do I benefit by participating? Your biggest advantage is the tax savings. Every dollar you set aside in your account reduces your income taxes, and you can be reimbursed for qualified medical expenses you buy every day. How do I get reimbursed for expenses? Reimbursement forms are available in the HR Benefits office. Simply complete the claim form, attach receipts, a provider bill or a copy of the Explanation of Benefits (EOB) you receive from your insurance company or Dependent Care Receipt and return these to the Human Resources Department. If I participated in Tax Saver last year, do I need fill out another form to participate this year? Yes. You must make a new election each year during open enrollment if you wish to continue your participation in the spending accounts. Participation is not automatic from year to year. Page 8