BASE® Flexible Spending Account
With the BASE® Flexible Spending Account employers are providing employees with more options to pay for out-of-pocket medical spending not covered under any insurance plan. Qualifying out-of-pocket expenses could include anything from co-payments, prescription drugs, over-the-counter medical supplies and more.
Benefit to Employer:
Enhanced Benefits Package.
By sponsoring a Flexible Spending Account, employers provide another means for employees to pay for medical costs through an employee funded benefit plan.
Even though this is considered an employer provided plan, the employee elects to make a pre-tax contribution for medical expenses that reduces the employer's share of FICA and FUTA taxes.
Option for Increased Plan Participation & Savings.
BASE® offers employers a variety of reimbursement methods, including a mobile app and debit card options, to help simplify the reimbursement process. This has proven to increase participation in the plan and when the number of participants increases, so does your savings. Click here to learn more.
Benefit to Employee:
Increased Take-Home Pay.
Since these funds are transferred from the employee’s wages on a pre-tax basis, employees save federal, state, Social Security and Medicare taxes. By setting aside these dollars pre-tax, employees are able to increase their take-home pay.
Online Portal, Mobile App & Debit Card Availability.
Having access to pay for qualifying medical expenses with the swipe of a card or the use of a mobile device with photos of receipts simplifies the reimbursement process for employees.
If an employee is unable to utilize the amount specified for out-of-pocket medical expenses, there could be an option to carry over up to $500 or provide a grace period to avoid losing funds at the end of the plan year.
Tax Savings Calculator
The BASE® 125 Cafeteria Plan provides a variety of options that are great for enhancing benefit packages, while allowing them to cut payroll taxes by decreasing the total taxable payroll. Employees will save 25% to 40% in taxes for every dollar they elect, while employers save on every dollar employees set aside from their paychecks to budget for their 125 plan.
With this calculator you will get an estimate of employee savings that can be gained utilizing the BASE® 125 Cafeteria Plan. The tax calculator provides an indicator for the potential savings that can be realized, whether any combination of the Dependent Care Assistance Plan, Flexible Spending Account, or Premium Only Plan options are utilized.
125 Cafeteria Plan Tax Savings Calculator
Enter amounts for one employee participant:
Frequently Asked Questions
Yes. According to the Affordable Care Act an employer must offer group health insurance to offer a general purpose FSA and the employees must have underlying group insurance coverage.
No. The only time an employee can make a change to the amount elected during the plan year is if they have had a qualifying event during the plan year (e.g., marriage, divorce, or the birth of a child). These types of election changes must be made within 30 days of the event.
The BASE® 125 Flexible Spending Account can be used to pay for medical expenses not paid for by insurance, usually deductibles, copayments, and coinsurance for the employee's health plan. A listing of legitimate expenses that can reimbursed for medical care can be found under Code § 213(d) that are not excluded by the plan documents. In order for an expense to be considered medical care under the tax laws, it must diagnose, cure, mitigate, treat or prevent disease, or affect a structure or function of the body.
Many people use IRS Publication No. 502 (“Medical and Dental Expenses”) to help guide them as to what expenses meet the Code requirements. But this publication should be used with caution, because it was meant only to help taxpayers figure out their income tax deductions – some statements are wrong when applied to health FSAs.
Yes. However, there are many drawbacks to self-administering an FSA.
- An employer who self-administers an FSA runs the risk of violating HIPAA requirements and limits, and even if the employer has under 50 employees it requires a co-worker to review personal health information.
- The man power required would eliminate any savings, especially considering the additional workload placed on someone to track contributions, handle reimbursements, keeping up to date on eligibility of expenses, adjudicate claims, etc.
- There is a lot of ongoing training and legal fees necessary to ensure the FSA stays in compliance and follows all rules and regulations established by the IRS, ERISA, etc. that come at an additional expense.
- The employer would also need to complete the Highly Compensated and Key Employee testing required for a 125 Cafeteria Plan.