How Does A Flexible Spending Account Work ?
Your tax-free deductions are deposited into your Reimbursement Accounts. Your eligible dependent care expenses will be reimbursed in full up to the maximum that has been deducted from your salary at the time you submit your claim. Your eligible medical care expenses will be reimbursed in full up to the maximum amount of your annual election at the time you submit your claim. The expenses must be incurred during the plan year while you are covered by the plan. You do not have to enroll in the Group Insurance Plans in order to enroll in either the Medical Care Reimbursement or Dependent Care Reimbursement account or both.
A cafeteria or flexible spending account plan (a Flex Plan) is an arrangement whereby employees may be entitled to use a percentage of their compensation to purchase certain benefits elected by each employee. This ability to choose among several benefit programs, including additional cash compensation, resulted in the label “cafeteria” plans. The advantage of a Flex Plan is that employees may elect to receive the benefits that will have the greatest value for them. In addition to the employer contributions that may be applied to purchase benefits under a Flex Plan, employees may also be given an opportunity to reduce their salaries in order to purchase benefits. The amount by which an employee’s income is reduced, under a salary reduction agreement, is not subject to federal income tax. Salary used by an employee to purchase nontaxable benefits under a cafeteria plan is also not subject to either FICA or FUTA taxes. Therefore, salary reduction elections result in savings for both emplo
