Learn the tax benefits of a Flexible-benefits Plan
Flexible-benefits Plan (FBP) is an employee benefits plan which
helps the employees' to save considerable amount of taxes by
paying certain expenses from their pre-tax income. Some of the
eligible expenses from pre-tax income are medical, vision,
dental, elder care, and dependent care. All state employees who
get a regular paycheck are entitled to participate in the
flexible-benefits plan.
Flexible-benefits Plan mainly boasts three components:
- Health Flexible Spending Account (HFSA) - Dependent Care
Reimbursement Account (DCRA) - Health insurance premium
deduction
Flexible-benefits Plan's reimbursements are made occasionally,
mostly once in a week. You will receive statements which helps
you to keep updated on your account. Quick information about
your account can be accessed with the help of customer service
line or email.
Due to the program's tax exempt features, the federal government
strictly regulates the Flexible-benefits Plan. FBPs are
regulated by sections 125 and 129 of the Internal Revenue Code
(IRS). Hence it is advisable to review the IRS rules before you
enroll. If you wish to enroll in the FBP, then it is better from
your part to discuss how the program may benefit you with your
financial planner or tax advisor.
How does a Flexible-benefits Plan work?
On enrolling in a flexible-benefits plan you first have to
decide how much amount you need to earmark for your Dependent
Care Reimbursement Account and/or Health Flexible Spending
Account. After you have fixed a particular amount for your
account, your employer will deduct the amount every month from
your salary for the flexible-benefits plan. The deducted amount
will be immediately credited to your accounts you have already
specified.
Reimbursement
Whenever you had met with an eligible expense, you can submit a
claim for reimbursement. While submitting a claim, make sure
that you have provided all necessary documents supporting your
claim. Reimbursements are generally made weekly.
- Health Flexible Spending Account (HFSA)
While submitting a claim for reimbursement, first submit all
your health care claims according to your health care plan. If
there is any amount which is not covered according to your
health care plan, you can claim those amounts for reimbursement
with your Health Flexible Spending Account. While submitting a
claim, make sure that you have provided a copy of an Explanation
of Benefits (EOB) or your receipt together with your
Flexible-benefits Plan Reimbursement Request. - Dependent Care
Reimbursement Account (DCRA)
You can submit a claim for your dependent care expenses by
providing a copy of your receipt to a complete Flexible-Benefits
Plan Reimbursement Request. You can also provide a complete
Reimbursement Request signed by your dependent care provider.
Monitoring your account
It is advisable to keep a close eye on your account every time
you make a claim or when ever you get a Flexible-Benefits Plan
reimbursement check. Generally you will also obtain an
Explanation of Benefits which displays your up-to-date details
of deposits, the claims you had submitted, the claims you were
paid, and the remaining amount you have in your account.
Besides this, you will be provided with an Account Status
Report, in most cases three months before the end of your
Flexible-Benefits Plan year. The report displays your total
accounts and reminds you to submit any outstanding claims. This
helps you to avoid any forfeiture.
Unused funds
According to the IRS regulations, you need to forfeit any
unspent funds in your Flexible-Benefits Plan at the end of each
plan year. Hence you must be very careful to plan your
contributions and to make sure you have submitted request for
all eligible reimbursements. Also make sure that you have
submitted your request with all documentary proof. Keep in mind
that it is always better to underestimate your eligible expenses
than to overestimate them and risk forfeiture.
About the author:
Jakob Jelling is the founder of http://www.cashbazar.com. Visit
his website for the latest on personal finance, debt
elimination, budgeting, credit cards and real estate.
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