From the December 2007 issue of Ceridian Connection

Are your employees taking advantage of an FSA? If not, they are ignoring the opportunity to save up to 30 percent on health care expenses. According to Ceridian Benefits Services, less than 20 percent of all U.S. employees offered Flexible Spending Accounts (FSAs) enroll and take advantage of their tax-savings benefits.

"Every year, employees leave millions of dollars on the table by failing to participate in FSAs," said Ceridian Senior Vice President of Benefits Services John Shade. Interestingly, enrolling in an FSA is the one simple thing people can do -- short of a lifestyle change -- to reduce their annual out-of-pocket health care costs."

Individuals can be faced with hundreds, even thousands of dollars every year in out-of-pocket medical expenses. FSAs allow participants to plan for and save on these expenses by depositing a certain amount of their paychecks into an account every month and receiving a tax-free reimbursement each time they incur an eligible expense. Because FSAs are exempt from federal income taxes, Social Security (FICA) taxes and, in most cases, state income taxes, they provide significant annual savings.

Consider an employee who makes $50,000 per year, pays the 25 percent marginal federal income tax rate and a 7.5 percent state income tax, and spends $2,400 per year on uninsured medical expenses. This employee can save more than $918 per year by participating in an FSA.

"Think of it this way: if your mechanic offered you 30 percent savings on your routine 2008 car maintenance, would you pass it up?" Shade added. "We strongly encourage those concerned about rising costs to enroll in an FSA and those who have already enlisted to take a few simple steps to maximize their savings."

Tips for using an FSA
Shade offers the following tips for effectively managing a flexible spending account:

• Know what's available. Ask your employer about your company's health care and/or dependent care FSA options.
• Estimate your expenditures. Use an FSA calculator to effectively determine how much to contribute to your account. Check out the Ceridian FSA calculator to determine how much to contribute.
• Get organized. Designate a folder at home or work for receipts that you can use to keep track of FSA-eligible expenses.
• Go paperless. Some employers' FSA plans let you pay for eligible expenses with a special debit card, providing you with direct access to your FSA account, less paperwork and immediate reimbursements.
• Monitor your account online. Keep track of your FSA account balance online with your FSA plan provider.

Benefits for employers
Ceridian encourages employers to become involved in promoting FSA options and educating employees on their value. "FSAs are most successful when employers proactively communicate to their employees about the benefits of enrollment," Shade said. "In doing so, employers are not only fattening their employees' pocket books, they are encouraging employees to take stock of their future health care needs, which fosters an environment that leads to healthy, more productive workers."

FSAs not only benefit employees, but are cost effective for employers too. To learn more about Ceridian's Flexible Spending Account Administration, contact your Ceridian representative.