Do you have that perfect recipe to help celebrate Thanksgiving? As the holiday season approaches, many cook and put together a feast for their family, creating the perfect holiday meal, leaving everyone thankful, happy, and ready for the year to come. But what about building the perfect “recipe” for your employees’ pre-tax benefit account for the upcoming year? It is all about finding the right “ingredients.” There are many to choose from, but only a few work together to benefit each business and their needs. When a company decides to incorporate a Health Savings Account (HSA), finding that “secret ingredient” to maximize the tax savings benefit is key. What is that “secret ingredient?” A Limited Purpose FSA.
The BASE® Limited Purpose Flexible Spending Account (FSA) is a type of flexible spending account that is strictly for reimbursing eligible dental and vision care expenses. This type of plan is for employees who are enrolled in a high deductible health insurance plan and also utilizing a Health Savings Account (HSA).
Not many know about this “secret ingredient” and what it can be used for. With a Limited Purpose FSA an employee can use their pre-tax dollars to pay for qualified dental and vision expenses, such as:
- Dental cleanings
- Dental fillings
- Vision exams, contact lenses, contact lens solution/cleaner
- Prescription glasses
- Dental & vision preventative care
How does a Limited Purpose FSA pair with an HSA? These two benefits go together like turkey and stuffing! Employees cannot use their Limited Purpose FSA balance to pay for qualified medical expenses that are not dental or vision costs, but the employee CAN use their HSA balance to fill in the gaps and pay for those expenses. With both benefits mixed together, it can help to make out-of-pocket medical expenses taste better more affordable. Funding dental and vision expenses from the Limited Purpose FSA may allow employees to keep more savings in the HSA. Incorporating these benefits into a business means that employees don’t have to entirely give up the benefits of a Flexible Spending Account (FSA) when there is an HSA in place.
When mixed properly with an HSA, the Limited Purpose FSA can help top off that perfect “recipe” further reducing employee and employer taxes while allowing the employee to allocate HSA funds to other purposes. Let BASE® help you perfect your recipe for a winning employee benefits package and call 888.386.9680 before the holidays!
1 out of 3 participants do not know that a Flexible Spending Account (FSA) and a Dependent Care Assistance Plan (DCAP) require a separate election. Both benefit strategies provide pre-tax dollars to spend on the things that mean the most in life – our health and our children, but do completely different things.
Most people don’t know what account does what with employees incorrectly believing a DCAP is used to pay for a dependent’s medical expenses. Check out below what both pre-tax benefit strategies do and how to get the most out of them.
The BASE® Flexible Spending Account is an account for employees to put pre-tax dollars into that can be used for qualified out-of-pocket medical expenses, which are not covered under any insurance plan. An FSA gives employees the option to pay for dental, vision, co-pays, deductibles, prescriptions, chiropractic services, and other 213(d) expenses through the year.
Each year, an employee can participate up to the annual maximum contribution limit of $2,750 per year.
The BASE® Dependent Care Assistance Plan is an account for employees to put pre-tax dollars into that can be used for qualified dependent care expenses. A DCAP gives employees the option to pay for daycare, preschool, before and after school care, and elder care.
Each year, an employee can participate up to the annual maximum contribution limit of $5,000 per year per tax household.
Here are some quick commonly asked questions:
- Can an employee have an FSA and DCAP at the same time? Yes! Because they pay for two different things, employees can have BOTH the FSA and DCAP to pay for qualifying out-of-pocket expenses.
- If the money in the FSA runs out, can the money from the DCAP be used? No! The money put in each account can only be used for expenses relating to that account.
- When are the funds in the account available? With the FSA, the entire election is available on the first day of the plan year. With the DCAP, funds are available as the deposits are collected through payroll.
- What is the best option? The best part is employees don’t have to choose one or the other. Depending on the family’s need and financial situation one or both is the best option.
These two types of plans help employees pay for different services, but bring the same great benefits to both employer and employees. Employers can offer their employees a benefits package that helps save money and make paying for medical and childcare expenses more affordable. This addition to any benefit plan not only helps employees realize more take-home pay due to pre-tax funds, but the employer can use this enhanced benefits package as a recruitment tool and help retain employees.
For more information on the BASE® Flexible Spending Account and BASE® Dependent Care Assistance Plan, call 888-386-9680.