Flexible spending accounts (FSAs) are a common feature of employee benefit plans. But why would an employer offer an FSA plan to its employees? Well, it’s extra money in your workers’ pockets that you and your employees probably don’t want to leave lying on the IRS’ table. Karen Kirkpatrick, senior compliance adviser for Infinisource, explained these points at an audioconference sponsored by Thompson Interactive. There she offered other key reasons why an employer may decide it wants to add an FSA plan to its benefits program.
- Health FSAs are not always subject to COBRA. Generally, an overspent health FSA is not subject to COBRA. Health FSA COBRA coverage only lasts through the end of the current plan year.
- Health FSAs can cover adult children. Because of the Patient Protection and Affordable Care Act (PPACA), participants can cover their adult children on a health FSA until the year in which the children turn age 27.
- You can save on orthodontia. Typically, an orthodontist provides a discount if payment is up front, instead of month to month. Health FSAs may now reimburse orthodontia expenses when paid, instead of when they are incurred.
- Dependent care expenses are a no-brainer. Dependent care expenses are usually a fixed cost that easily exceeds the $5,000 FSA limit in a year, even for just one child. Tax-free reimbursement makes a lot of sense.
- Debit cards make it even easier. Debit card auto-substantiation rates are usually over 90 percent, virtually eliminating the hassle of keeping receipts and waiting for reimbursement.