Health Flexible Spending Account (FSA)
Health Flexible Spending Accounts, previously known as Medical Expense Reimbursement Plans or Medical FSA plans are special accounts that allow employees to use pre-tax dollars to pay out of pocket medical expenses not covered by health insurance. The Health FSA reduces payroll taxes for both the employer and the employee making it a popular benefit option. For the employee it's like getting a 30% discount on medical, dental and vision care expenses.

Here's how FSA Plans work:
Each year the sponsoring employer allows an FSA open enrollment period where each employee is given the opportunity to decide how much money they estimate they'll spend in healthcare, dental and vision care expenses for the coming year. Employees are encouraged to be conservative in their calculations so they don't over estimate. Each employee then elects this amount to be divided into regular payroll deductions and deposited into their Health FSA account.

Employees then turn in receipts for qualifying medical, dental and vision care expenses to be reimbursed from their tax-free Health FSA account.

Qualifying Health Flexible Spending Account expenses include:

• Vision Expenses including Glasses and Contacts
• Health Plan Deductibles
• Rx - Prescription Drugs
• Health Plan Co-Payments
• Orthodontic Procedures
• Chiropractic Charges
• Dental Charges
• Blood Work
• X-ray
• For a complete list see: Medical Expenses That Qualify

What About FSA Administration, Do I Need An FSA Administrator? That depends. Most of our competitors would try and convince you FSA Administration is much too difficult for you to try yourself, and then they assign your account to one of their lowest paid employees.

• If you prefer not to add the additional workload to your staff Core Documents offers state-of-the-art online administrative services starting at only $8 a month.
• Each employee receives a MasterCard Debit Card to access the funds in their account without having to spend their own money and wait for reimbursement.
• Core Documents has no minimum monthly fees for small accounts so this is an ideal solution for some clients. Click here to see Core's Administrative services.

For those clients that would rather not spend the extra money every month for administrative services Core Documents offers a robust 10 megabyte Excel Spreadsheet Template for $49 that will manage up to 200 employees and up to six accounts for FSA, DCAP, HSA, HRA, Parking and Transit plans. Click here to see more information about $49 CoreData Administration Software.

When Is The Best Time To Start A FSA Plan? Anytime. Health FSA Plans can be started anytime.

• The misconception is they need to be started January 1 and run through December 31.
• The fact is you can start a Plan anytime of the year.
• If you prefer a calendar year, January 1, through December 31, and it's mid-year, you can always have a short Plan Year the first year, i.e. June 1, through December 31, and your second year will be back on a calendar Plan Year.
• However, it is not unusual to align the Plan Year to your tax year, the renewal of health insurance, or any other reason. Our application addresses Short Plan Years if requested.

What About Existing Section 125 FSA Plans Already In Place, That Need To Be Updated? If you already have an FSA Plan you started years ago, you can amend and restate the Plan anytime.

• Our order forms address the amended and restated document dates.
• We simply need the original start date of your old plan so we can maintain the continuity back to the original start date.
• It's not unusual for a employer to misplace a Plan Document and need to replace it.
• If your document was written before 2002, it certainly needs to updated as soon as possible.
• So many changes have taken place in IRS Code and new laws that today's Plan Document is almost 15 pages larger than documents prior to 2002. This means you may be making administrative decisions based on outdated information.

So What Exactly Will I Get From Core Documents for $149, How Does This Work? The Section 125 Health FSA Plan can be combined with the Section 125 Premium Only Plan and a Section 129 Dependent Care Assistance Plan for a full plan. Many purchase just one of the three components. It's up to you and your specific needs.

Core Documents provides you with custom FSA plan documents prepared specifically from the variable criteria you provide in the application. We do not sell fill-in-the blank document templates that can be used for numerous clients. You will receive a single user license for the Plan Document, or combination of Plan Documents of your choice.

Each Plan Document package consists of a one inch ring-bound notebook with five sections:

• Section 1 is the Board Resolution to Adopt the Plan;
• Section 2 is the IRS required Section 125 Plan Documents, signature ready;
• Section 3 is the Section 125 Summary Plan Description required by the Department of Labor;
• Section 4 contains the Election Forms, Claim Forms, and Change Forms needed to operate the Plan;
• Section 5 contains a complete Administrative Guide designed to be a resource as needed for administrative questions.
• For an additional fee you can purchase a CD with the Summary Plan Description in PDF format and the Forms in MS Word format for revision, edits, etc. Without the Forms on the disk you will have to photocopy the Summary Plan Description as needed for all employees and type changes into the forms.

So, I've Purchased a Section 125 FSA Plan From Core Documents, What's Next? Your signature ready custom FSA Plan Document will arrive within a week.

• A complimentary summary of Plan Sponsor responsibilities will be included with the documents in case you decide against reading everything.
• You do not have to file a copy of the Plan Document with any governmental entity.
• Also, Annual 5500 filing was suspended in 2002 for all plans except those with over 100 participants in a Health FSA. (That was 100 Participants, not 100 Employees, and it only applies to Health FSA Plans).
• You will distribute a copy of the Summary Plan Description to every Eligible Employee and a copy of the Election forms.
• Every employee should complete a new Election form designating their specific deductions each year.
• These forms should remain on file in the event of an audit or review.

Do I need a Trust Account or Special Bank Account to Hold The Funds? No trust account is required by the IRS Code. ERISA may require a special trust account, however they have decided not to enforce the need for a trust account. It is generally accepted that a trust account is not necessary if separate accounting is maintained within the company's general asset account.

Also See:
Exactly What You Receive in a Health FSA or Dependent Care Assistance Plan
All About Section 129 Dependent Care Assistance Plans
All About Section 125 Premium Only Plans
Expenses That Qualify for Reimbursement
A Section 125 Tax Savings Calculator
Outsource Administration with Online Portal and Debit Cards
$49 DIY Administration Software