Benefit Solutions, Inc.1210 Sycamore Sq. Dr, Suite 200 Midlothian, Virginia 23113
Phone Number:(804)
379-0909
Fax:(804) 379-5898
FSA's Defined
A Flexible Benefit Plan, sometimes referred to as
a Cafeteria Plan, is a type of fringe benefit plan than can be offered by
all employers. It is not your normal benefit plan in that it does not provide a
specific benefit to employees. For example, health insurance benefits provide
health insurance and profit-sharing arrangements provide shares of stock.
What it does do is allow employers and employees to save on taxes and put more
take-home pay in both of their pockets.
Specifically, it allows employees to pay for
certain out-of pocket expenses pre-tax. Expenses employees normally pay for
after-tax such as health-related insurance premiums, non-reimbursed medical
costs and child and dependent care costs can be shifted to be paid for with
tax-free dollars instead. This means no federal taxes, no state taxes and no
social security taxes will ever be paid on those expenses. For most Virginia
employees, this saves at least 28% of every dollar that is deducted pre-tax
(click here
for an example).
A company without a flexible benefit plan normally
pays employees their gross pay, computes taxes on that gross pay, and then
deducts the employee's share of health insurance premiums and pays them their
net pay to use for all their other living expenses. A company with a flexible
benefit plan takes an employees gross pay, deducts any group health insurance
premiums, deducts any amount an employee chooses to contribute to a medical or
dependent care reimbursement plan to arrive at the employee's adjusted gross
pay. Then the company computes taxes based on the adjusted gross pay - not
gross pay.
Since the adjusted gross pay is less, taxes are
less for the employee and only the adjusted gross pay appears on the employees
W-2 form for the year. The company also saves 7.65% on every dollar deducted
before taxes because the company no longer has to pay matching social security
taxes on any amounts paid for through a flexible benefit plan. This creates a
win-win situation for companies and their employees.
Four Parts to the Program:
There are three basic parts to a flexible benefit
plan. Please click on one of these items to find out more about how these work
and how they can help you.