A Flexible Benefit Plan allows employees to convert many expenses, which were previously not deductible, into expenses that can be paid for with pre-tax dollars. You do this by making pre-tax contributions to the Flexible Benefit Plan. These contributions reduce your gross, or taxable, income so you pay less in taxes. Most employees who participate experience at least a 30% of every dollar contributed to the Flexible Benefit Plan.
Participants in a Flexible Benefit Plan will save:
- FICA withholding tax (Social Security & Medicare)
- Federal withholding tax
- State withholding tax (not applicable in some states)
- Premium Account: Signing up for the Premium Account allows employees to have their portion of company sponsored insurance premiums withheld before taxes are calculated. This option will increase take home pay with the stroke of a pen.
- Health Care Reimbursement Account: The Health Care Reimbursement Account gives employees the opportunity to save taxes on their family's out-of-pocket health care costs. This may include medical services that are not covered by traditional insurance (chiropractic or acupuncture treatments, for example).
- Limited (HSA-Compatible) Reimbursement Account: The Limited Reimbursement Account is similar to the Health Care Reimbursement Account however it is compatible with HSA plans and can reimburse only dental, vision and post-deductible medical expenses.
- Dependent Daycare Account: The Dependent Daycare Account allows employees to use tax-free dollars to pay daycare providers. In most cases, employees will experience greater tax savings through this type of reimbursement account than if they would use the Daycare Tax Credit on their tax return.