Employer Administered Flexible Spending Account

Employer Administered Flexible Spending Account

Employer Administered FSA... an important part of your employee benef its plan. Blue Shield of California offers an affordable way for you to provide a valuable benefit to your employees and enjoy substantial savings for your company. Designed specifically to benefit the small employer, the Employer Administered FSA follows a format that makes it inexpensive to implement and easy to administer. The Employer Administered FSA reduces the cost of designing a flexible benefits plan and is a less expensive alternative to third party flex administration. It puts the tax savings advantages of the most popular flexible benefit plans in the hands of any business. With an Employer Administered FSA from Ceridian you can: Increase your employees take-home pay Make your health care more affordable Help your employees reduce the cost of dependent care Reduce your payroll related taxes The Employer Administered FSA is: Complete... There s no need for plan design consulting, administrative services or the expense associated with them. Each Administrative Kit includes plan documents that meet all requirements of the Internal Revenue Code (IRC) for flexible benefit plans. Ceridian ensures that your documents are in compliance with current regulations. Easily administered... Self-administering the plan doesn t just carve out third party administration, it makes administration as easy as 1-2-3 with: Step-by-step instructions written for the flex plan novice Complete enrollment materials, summary plan descriptions, claim forms and ledgers Administrative software on CD-ROM for those who want to automate the plan A great value Employers implementing an Employer Administered FSA can realize a dramatic return on their investment in the form of tax savings, employee goodwill and employee tax savings. Refer to the tax savings worksheet in this guide to see how much your company and your employees can save with the Employer Administered FSA plan. The annual renewal and update service fee of 500 can generally be offset in the first two months of each subsequent year. Three tax-saving plans from which to choose The Employer Administered FSA helps employers reduce payroll taxes and employees reduce income taxes by allowing them to take advantage of one or all of the following pretax benefit plans: 1. Premium Only Plan: Eliminates FICA (social security and medicare taxes), federal and most state income taxes on the employee s share of most qualified insurance premiums. 2. Health Care Flexible Spending Account: Eliminates FICA, federal and most state income taxes on unreimbursed employee health care expenses such as deductibles, co-payments, vision care, dental care and many other qualified expenses. 3. Dependent Care Flexible Spending Account: Eliminates FICA, federal and most state income taxes on up to 5,000 of employment related dependent care expenses annually. Health Savings Account (HSA) Ceridian now has a plan document amendment available to allow High Deductible Health Plan premiums and HSA contributions to be deducted on a pretax basis. Contact Ceridian Sales at 415-642-7215 for more information. make every benefit count

The Employer Administered FSA has the tools to make it happen 1 Premium Only Plan (POP) The POP allows employees to pay for their share of group insurance premiums on a pretax basis. With the Employer Administered FSA, employees can have their premiums deducted from payroll for specific types of group insurance, such as medical, dental, group term life (up to 50,000), vision, and short and long-term disability. Both the employer and employee can immediately start reducing taxes. Employees pretax premium contributions reduce the payroll on which FICA tax contributions are calculated. The employer saves 7.65% FICA tax on pretax premiums The employee saves on FICA, federal and most state income taxes. Most employees will realize a 23% to 35% tax savings on their pretax contributions 2 Health Care Flexible Spending Account (FSA) The health care FSA lets employees plan ahead for likely medical expenses by establishing a health care spending account using pretax dollars. Employers and employees reduce taxes on payroll dollars that are contributed into the FSA before the calculation of FICA, federal and most state income taxes. Some eligible expense examples are: Medical plan deductibles Physicals Dental and Orthodontic care Co-payment amounts Medically necessary equipment Hearing aids Prescription drugs Certain unreimbursed medical expenses Assistance for the handicapped Over-the-counter drugs Routine & preventive chiropractic care Vision care The entire list of allowable expenses covers most legitimate health care procedures. Using the employee enrollment materials provided within the Employer Administered FSA, Administrative Kit, employees can calculate a realistic, but conservative, estimate of annual reimbursable expenses. After the contributions are made into the FSA, the employee can submit receipts for eligible out-of-pocket health expenses. The employer will reimburse the employee for the claims up to the entire amount of the annual election. 3 Dependent Care Flexible Spending Account (FSA) This third portion of the Employer Administered FSA provides tax relief for your employees with dependent care expenses. Statistics indicate that 30% or more of your work force incurs child or adult day care expenses in order to work. This lets those employees pay for up to 5,000 of qualified dependent care expenses annually on a pretax basis, allowing for more tax relief. Employees who pay for qualified dependent care regularly contribute a portion of their income into their FSA and are then reimbursed after the expenses have been incurred. The enrollment materials will help define allowable expenses and the limits on contributions under this portion of the plan.

The Administrative Kit Your Guide to Self Administration The Administrative Kit consists of an Administrator s Guide, a customized plan document, nondiscrimination testing and plan administration software. We have included the specific materials required to help support each IRC Section and designed each tax saving section of the Employer Administered FSA to simplify the implementation and enrollment. It s important to understand that employee money contributed to FSAs, but not used during the plan year, is forfeited. This use-it-or-lose-it provision encourages conservative contribution estimates and is clearly explained in our enrollment materials. With the Employer Administered FSA, you can easily begin realizing the tax advantages within weeks of setting up the plan. The Administrator s Guide includes: 1. Simple, step-by-step instructions. 2. All the materials necessary to effectively communicate the plan to your employees, including: Employee announcement letter Employee enrollment forms Summary plan description that provides answers to common employee questions. Annual re-enrollment notice FSA savings worksheets Administrative guidelines and forms 3. Nondiscrimination testing procedures We include everything employers need to implement, communicate and administer the plan and in addition, Ceridian supports you with a staff of experienced technical support representatives who are always ready to answer your questions. Maximize your benefits Once you re ready to take the next step, you need to determine whether your company will benefit with the Employer Administered FSA. Please review the following questions to evaluate your business. Is your company structured as a C corporation? Yes Then all employees, including owners, are eligible to participate in the plan. No Sole proprietors, partners in a partnership, or 2% or more shareholders of an S-corporation cannot participate. Even though ineligible for the plan, their employees can participate. Will your owners, officers and highly compensated employees contribute to the plan? Yes No Depending on the contributions by other employees, these individuals may be able to participate fully in the plan. However, the contributions elected by owners, officers and highly compensated employees may be restricted to meet nondiscrimination criteria. You may exclude owners, officers and highly compensated employees from the plan. Doing so helps your plan pass the nondiscrimination tests. Does your company also offer an HSA as a benefit to employees? Yes No HSA regulations prohibit contributing to an HSA while also being covered under certain other plans, including Ceridian s Employer Administered FSA. Please contact your HSA advisor for additional information. Employees may take full advantage of the savings offered by this benefit. For answers to your questions about the administration of the Employer Administered FSA, call the Information Hotline 800-767-4969 Monday through Thursday 8:30 a.m. until 6:30 p.m., Friday from 8:30 a.m. until 5:30 p.m. Easter n Time. Or you can email us at cyberpop@ceridian.com. If you think an Employer Administered FSA is right for your company, you can estimate your tax savings by completing the following worksheet using the guidelines below: POP Assume all employees will elect to pay their premiums on a pretax basis. Health Care FSA Ask employees if they are interested in saving money on eligible health care expenses by submitting their receipts for pretax reimbursement. Dependent Care FSA Ask employees if they are interested in saving money by submitting their dependent care receipts for pretax reimbursement.

Employer Estimation Worksheet Use this worksheet to project the estimated tax savings that can be generated for your business. Total the estimated annual tax savings from all three sections to calculate the annual tax savings. PREMIUM ONLY PLAN (POP) TAX SAVINGS WORKSHEET Insurance Coverages (A) Annual Employee Premium Contribution Total Employee ( A X 28% ) Total Employer ( A X 7.65% ) Health Dental Vision Other TOTAL SAVINGS (1) (4 ) HEALTH CARE FSA TAX SAVINGS WORKSHEET Employee Participants (B) Annual Employee Health Care FSA Contribution Total Employee ( B X 28% ) Total Employer ( B X 7.65% ) TOTAL SAVINGS (2) (5) DEPENDENT CARE FSA TAX SAVINGS WORKSHEET Employee Participants (C) Annual Employee Dependent Care FSA Contribution Total Employee ( C X 28% ) Total Employer ( C X 7.65% ) TOTAL SAVINGS (3) (6) TOTAL EMPLOYEE TAX SAVINGS (1+2+3) TOTAL EMPLOYER TAX SAVINGS (4+5+6)

Renewing the Employer Administered FSA The Employer Administered FSA may be renewed annually for small fee of 500. Renewal provides the employer with timely updates and modifications to ensure continued compliance with changing IRS regulations. Continuing support includes: Guidance regarding the most current legislation related to cafeteria plans via newsletter Updates to your Administrative Kit and required amendments to plan documents Nondiscrimination testing support Unlimited, free consultation on our Information Hotline, by fax or via email The Administrative Kit and supporting documents are backed by Ceridian, a firm that specializes in the design and implementation of employee benefits programs. For answers to your questions about the plan call our INFORMATION HOTLINE 800-767-4969 Or email us at cyberpop@ceridian.com. bring your benefits to life maintain compliance get information faster make every benefit count

Employer Administered FSA Application Section A: General Information 1. Plan Sponsor (Employer s complete legal name) 2. State of Incorporation or domicile 3. Name of Plan (Example: ABC Company Flexible Benefit Plan) 4. Type of Plan A new plan effective as of / / An amendment and restatement of an existing Section 125 plan (transfer of FSA from your current administrator) Effective date of original plan / / Effective date of amended and restated plan / / *Application must be received by Ceridian at least 15 business days prior to the plan effective or amendment restatement date 5. HSA Amendment Include language to allow the high deductible health plan premiums and HSA contributions to be deducted on a pretax basis. (Important Note: HSA regulations prohibit contributing to an HSA while also being covered under certain other plans, including Ceridian s Employer Administered FSA. Please contact your HSA advisor for additional information.) Section B: Definitions 1. First day of Plan Year Last day of Plan Year (must be a 12-month period) (The Plan Year must be 12-months. It usually coincides with the renewal date of the insurance plan, calendar year or company fiscal year. The last day of Plan Year must be 12 months after the first day of the Plan Year.) 2. Eligibility for new and existing employees: An employee of the company regularly performing services at least hours per week shall become a participant on the first day of the month coincidental with or next following the date the employee completes days of consecutive employment. (Days of service and hours per week required for eligibility usually coincide with eligibility for insurance programs.) 3. Eligibility for rehired employees Employees rehired after a period of termination will become eligible for the plan on the first day of the month coincidental with or next following the date the employee completes days of consecutive employment. (Employees rehired within 30 days must continue with previously-elected pretax contribution amounts.) 4. Maximum plan year contribution to the Health Care Flexible Spending Account 5. Total number of covered employees of the employer Section C: Administration Indicate the name and address of the person responsible for plan administration. The application should be signed by an authorized representative of the plan sponsor. Reminder: Do not start pretax deductions until you have received the Administrative Kit and Plan Document from Ceridian and implemented the plan. Plan Administrative Contact Title Mailing Address City State Zip Shipping Address (No PO Box) City State Zip Telephone ( ) Fax ( ) Email Email address required for delivery of the newsletter. This Agreement will become effective on / / (the Effective Date, or Amendment and Restatement Date, if applicable). It will continue for an initial term of one year beginning with the Effective Date, or the Amendment and Restatement Date and continue thereafter until terminated by either party upon 90 days prior written notice. Signature Date Section D: Broker Information Name Company/Agency Mailing Address City State Zip Telephone ( ) Fax ( ) Agent Signature Email Email address required for delivery of the newsletter. An Independent Member of the Blue Shield Association Please contact your Ceridian sales representative at 800-790-9057 with questions about this plan or application form. Please return completed application to: Upon receipt, you will be invoiced for 500, sales tax may apply. Ceridian Benefits Services 3201 34th Street South St. Petersburg, FL 33711 Fax: 800-272-9654

Ceridian is a global business services organization that offers a comprehensive range ofi nnovative solutions. From human resources and benefits to work-life and health and productivity services, we help organizations maximize their human, financial and technology resources. As a leader in payroll outsourcing, gift cards and controlled spending, we re also the driving force in payment innovation. Whether we re partnering with you to improve employee productivity, save money or minimize financial risks, it s our business to help you stay focused on yours. Ceridian 3311 East Old Shakopee Road Minneapolis, Minnesota 55425 800-790-9057 www.ceridian.com 2009 Ceridian Corporation. All rights reserved. Printed in USA. 11/09 JN-C Blue Shield of California, an Independent Member of the Blue Shield Association.