Section 125 Plans Flexible Spending Accounts Health Reimbursement Arrangements Health Savings Accounts

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1 Section 125 Plans Flexible Spending Accounts Health Reimbursement Arrangements Health Savings Accounts We understand the important role that employee benefits, especially health insurance, play in our member s ability to recruit and retain top quality employees. With the cost of health insurance continuing to rise, most employers ask their employees to share in the cost of health insurance through premium sharing, deductibles and co-insurance. By putting a Premium-Only Plan, Flexible Spending Account, Health Savings Account, and/or Health Reimbursement Arrangement in place, both the employer and employees can benefit through tax-preferred methods. Focusing the power of small business

2 1. Section 125 Plan Administration A Section 125 Plan, also referred to as a Premium-Only Plan, allows employees to pay for a portion of health insurance premiums with pre-tax dollars. Eligible premiums include health, dental, vision and up to $50,000 of group term life insurance. If your company is increasing the amount employees pay for insurance plans, or perhaps introducing premium-sharing for the first time, it makes financial sense to deduct these contributions on a pre-tax basis. Your employees benefit because their premium contributions are deducted pre-tax, decreasing taxable income and increasing take-home pay. Your company benefits because FICA tax liability is lowered. Options and Cost Self-Administered Premium-Only Plan $99 for plan templates When you enroll in the self-administered Premium-Only Plan, you are given all the necessary document templates to administer the program yourself including a fully compliant Plan Document and Summary Plan Description, employee enrollment forms, payroll guide, and nondiscrimination / concentration testing spreadsheet. You will also have access to the Kushner & Company Project Team who will handle any questions you have along the way. Fully Administered Premium-Only Plan $27.50 per month When you enroll in the fully administered option, Kushner & Company, does all the work for you. The Plan Document and SPD is completed for your company and tailored to your specifications. You will be contacted by a representative from the Project Team who will set up all aspects of the plan on your behalf. This option minimizes paperwork for you to complete and greatly simplifies the implementation and administration. This option also includes annual nondiscrimination testing for your company.

3 2. Flexible Spending Account (FSA) Administration A Flexible Spending Account is a low cost way for you to enhance your employee benefits package. Employees reduce federal income taxes, social security taxes, and state income taxes and allows your employees to better budget for known out-of-pocket expenses over a twelve month period. Flexible Spending Accounts Health Care Account: Employees may set aside a portion of their salary through pre-tax payroll deductions to pay for medical, dental or vision care expenses for the themselves, their spouse and dependents that are not covered by any other insurance plan. These dollars go into a health care spending account and as expenses are incurred, employees can file a claim against their account and withdraw money to pay the expenses. Examples of such expenses include deductibles and copayments, the cost of prescription drugs, vision care (including eyeglasses and contact lenses), dental care and orthodontia not covered by your group health or dental plans. Flexible Spending Accounts Dependent Care Account: Employees (and their spouse, if married) who have children and have to pay someone to watch the children so they can work, look for work, or attend school full-time. The employee can elect to set aside a portion of their salary through pre-tax payroll deduction to pay for these expenses. The dollars go into a dependent care spending account and as expenses for daycare or babysitting are incurred, employees can file a claim against their account and withdraw money to pay the expenses. Cost $5.25 per month per participant ($52.50 per month minimum) Free debit card If you elect this option, you will receive the Premium Only Plan administration, as well as Flexible Spending Account processing for your employees health and/or dependent care. This includes an administration guide to aid you in the day-to-day operations of the FSA plan, employee communication materials, enrollment forms and claims kit, daily processing of employee claims, and once a week you ll receive a Deposit Report, Check Report and a Year-To-Date Benefit Summary. Employees receive a free debit card to pay for eligible expenses that gives them direct access to their account. Your employees will have password protected online access where they can view all FSA activity within their own account.

4 3. Health Reimbursement Arrangement (HRA) Administration Health Reimbursement Arrangements (HRAs) HRAs are a tax-advantaged benefit that allows both employees and employers to save on the cost of healthcare. HRA plans are employer-funded medical reimbursement plans. The employer sets aside a specific amount of pre-tax dollars for employees to pay for health care expenses on an annual basis. Based on the plan design, HRAs can generate significant savings in overall health benefits. The most attractive feature of HRAs is that they allow for payment of all qualified health-related expenses on a pre-tax basis. All businesses, including one-person and part-time businesses, may operate an HRA plan. Kushner & Company will provide all the necessary documentation including Custom Plan Document and Summary Plan Description (SPD), employer-specific enrollment forms, employee communication materials including an employee newsletter explains the benefits and tax savings of the plan and online benefits access, direct deposit and available debit cards. Cost Standard Health Reimbursement Arrangement $5.25 per month per participant ($52.50 per month minimum) Free debit card SBAM also offers a self-administered HRA option for $99. You will receive all the necessary document templates to administer an HRA yourself including the HRA Master Plan Document, HRA Summary Plan Description, and HRA Plan Document Cover Letter.

5 Enrollment Newsletter As part of your Plan s initial implementation, you are provided with an enrollment newsletter for your employees. This will help your employees understand the tax savings of the Premium Conversion Plan and what their participation in it involves. Payroll Guide Your Premium Only Plan will provide tax savings for both you and your employees. The employee salary reduction contributions to the Plan are not subject to FICA, Medicare, federal, or state taxes (if outside of Michigan, consult your project manager). However, you will need to contact your tax advisor to determine if state or local income taxes apply. In addition, the employer does not pay FICA, Medicare or federal unemployment taxes [FUTA] on employee contributions (nor state unemployment taxes [SUTA] in some states, although you do pay SUTA. IRS Form 550 The IRS has suspended the requirement of Premium Only Plans to file an IRS Form 5500 or any of the associated Schedules. However, if your health and welfare plan has greater than 100 participants you are still required by ERISA to file a Form 5500 and all applicable Schedules. Customer Service When you chose SBAM and Kushner & Company to provide the tools necessary to your Plan, you chose to receive extensive expertise whenever you need it. Your Project Team will always be available to answer any questions you may have regarding the administration of your plan(s). Debit Card With the debit card, an employee can access his or her Health Care FSA, HSA or HRA directly to pay for eligible expenses. Plus, this helps to increase both participation and contributions, reducing the amount of taxes your company and your employees pay. Claims Processing Kushner & Company processes claims weekly or daily (your choice) and employee reimbursements can be given in the form of a check or direct deposit into their bank account.

6 Timeline Of Implementation for FSA, HSA and/or HRA Administration Complete implementation of the plan(s) usually takes two to four weeks. After SBAM receives the initial enrollment form and agreement, Kushner & Company will contact the group and/or insurance agent via with the Client Information Sheet and the HRA Adoption Agreement (if applicable). A conference call is scheduled to gather the necessary information together with Kushner & Company. Once Kushner & Company has received the completed Client Information Sheet and the HRA Adoption Agreement (if applicable), they will begin to generate the materials for the plan(s). Depending on the time of year, and complexity of the plan(s), the client will receive all of materials within one to two weeks. Your client receives enrollment and plan administration materials from Kushner & Company in a series of s separated by the types of information. These s contain all materials necessary for the client s open enrollment period and plan administration throughout the plan year. There will typically be a separate for employer materials and employee materials. They may include items such as: Employee Enrollment Form Request for Reimbursement Form Newsletter and/or PowerPoint Flexible Spending Account Worksheet Direct Deposit Authorization Forms (employer and employee) Online Inquiry and Claim Entry Instruction FSA Eligible Expense List Debit Card Information Notice of Termination FSA Deduction Reporting Instruction Discrimination Testing Information and Census Spec Sheet Employer Administration Guide

7 4. Health Savings Account (HSA) Administration A Health Savings Account (HSA) is a tax-exempt trust or custodial account established exclusively for payment of current and future qualified medical expenses. To have an HSA, you must first have a qualified high-deductible health plan. Qualified Medical Expenses Qualified medical expenses for an HSA include health insurance plan deductibles, co-payments and coinsurance amounts, prescription and over-the-counter drugs, dental services, vision care, long-term care, psychiatric and certain psychological treatments and certain health premiums including COBRA (but not premiums while an active employee). HSA Contributions Once you have established the HSA, your company, the employee or both may contribute to the HSA in a given year. For an HSA established by a self-employed individual, the individual may contribute to the HSA. In addition, family members may contribute to an HSA on behalf of another family member. Contributions to an HSA must be made in cash. Contributions to an HSA may be made through a Section 125 Plan via the pre-tax payroll method or after-tax by making deposits. In any given year, contributions may be made until April 15 the following year. HSAs may be invested much like a 401(k) or an IRA in an interest-bearing account, a mutual fund or stocks and bonds. Because you don t know when the HSA will be called upon for medical expenses, it is generally recommended that the majority of funds be readily accessible through a bank account. No Limits or Risk of Losing Funds with an HSA There is no use-it-or-lose-it provision with an HSA. Any balance of funds at the end of the year may be carried over into future years with no limits. The HSA Stays with the Employee Because the account is owned by the employee or individual and maintained in a trust, the account holder may use the account after he or she leaves the employer who offered the qualified high-deductible health plan. Employees receive a free debit card to pay for eligible expenses and gives them direct access to their account (when using an approved bank). Cost Health Savings Account Administration $2.75 per month per participant ($27.50 per month minimum)

8 How To Enroll In The Program Simply submit the completed enrollment form and signed agreement. If you opted for the selfadministered Premium-Only Plan, the templates will be ed to you with instructions. If you opted for one of the fully-administered FSA, HRA and/or HSA programs, a representative from Kushner & Company will contact you and discuss the next steps in implementation. SBAM partnered with Kushner & Company of Portage, Michigan because they are a top leader in the field of human resources and benefits administration. By receiving no compensation from insurance companies, brokers or sellers, Kushner offers unbiased recommendations. Their primary concern is to provide exceptional solutions that simplify benefit-related responsibilities. Kushner & Company is dedicated to providing comprehensive employee benefits consulting and administration services individualized to assure your specific benefit requirements are entirely fulfilled. Because the firm is a pioneer in employee benefit consulting and administration, you can have complete confidence in Kushner & Company. SBAM s Products and Services All of SBAM s products and services are developed for small business owners by small business owners. Our volunteer leaders and staff have researched services and negotiated prices that are generally only available to much larger companies. You can feel confident in choosing SBAM Approved Partners for all of your business needs. For additional information, please contact SBAM at (800) or