Ceridian makes FSAs easier to understand and use
Who doesn't like to save money? While most people jump at the chance to save their hard-earned dollars on everything from food to cars, they often leave potential savings behind when it comes to one of their most rapidly growing expenses: health care.
How the savings
add up
Just how much savings can you gain from an FSA program? Here's an example based on an annual salary of $50,000:
| Employee Salary | $50,000 |
| Employee's contribution to FSA | $1,000 |
| Typical Employee tax savings | $250 |
| Employer tax savings | $76.50 |
Check out the FSA savings calculator to see how much you can save! Employer savings calculator
Employee savings calculator
Although it's not as easy as clipping coupons or waiting for a sale, saving on health care costs is possible with a Health Care Flexible Spending Account (HFSA). As health care costs continue to soar, participation in an HFSA is one of the few ways in which employees and employers can stretch their money available for medical expenses.
That's right. FSAs are a win-win for employers who offer them and to employees who participate in them. That's because of the inherent tax breaks that occur when employees set money aside in their health care FSAs, thereby reducing their taxable income and reducing the amount of taxes their employer must pay as well. In some cases, the tax savings can pay for the entire cost of FSA administration -- meaning it's a no-cost benefit. Approximately 80 percent of all employers (with 200 or more employees) offer this benefit. But despite the tax savings, only 20 percent of eligible employees actually participate in a health care FSA. Why so few participants?Even though FSAs have been available for 20 years and the government continues to make them more appealing and easier to administer, a few roadblocks prevent some employees from participating. The most common roadblock is the "use-it-or-lose-it" rule. Under U.S. tax laws, funds left over after year-end revert back to employers. The amount of forfeitures is immense according to Mary Jo Davis, senior manager for Ceridian Benefits Services. She estimates that one in four of Ceridian's 400,000 FSA participants each forfeited an average of $250 in pre-tax contributions to their accounts in 2006. The key to using an FSA efficiently is accurately estimating your upcoming expenses -- which is not always easy to do. However, as more employers move toward consumer-driven health care, employees are becoming accustomed to learning more about their health and health care spending. "Whenever you start to measure something, you can begin to make better decisions about it," Davis said. "FSAs can be the first stepping stone towards consumer-driven health care, as it shows employees how much they are spending out of pocket on health care expenses. It might be a real wake-up call, but it will give them a much more accurate estimate of what they could contribute to their FSA so they avoid leaving money on the table." Another reason for low participation is the amount of paperwork and time -- either real or perceived -- involved in submitting receipts and waiting to be reimbursed. Administering FSAs can be difficult for employers as well. "FSAs can become complex because you need to keep on top of regulatory issues, manage the accounts and ensure privacy is maintained," Davis said. "If employers are having difficulty in managing these aspects of FSAs, they are probably unable to fully educate employees about the benefit, which results in low participation. That's why many employers look to Ceridian to help manage this important, but often under utilized, benefit." Three models, one goal
Ceridian offers three different models for administering FSA programs. While each has unique features designed to meet individual client needs, all have the same goal: making FSAs easier to understand and use, thereby increasing participation. Over the years, changes in regulations, improved technology and an emphasis on customer service have made FSAs more attractive to employers and employees. Highlights include:
- Special purpose debit cards that are linked to health care FSA accounts. This enables participants to access money in their account at point of sale -- no more waiting to be reimbursed.
- New for 2008 is the Information Inventory Approval System, which allows retailers (generally grocers and discount stores) to separate products into FSA and non-FSA-eligible categories. Participants can pay for eligible expenses via their FSA debit card and pay for non-eligible items with a different form of payment.
- Automatic claim handling with select health care providers, which reduces paperwork.
- An extended grace period giving participants more time to use their FSA dollars that they might otherwise forfeit at the end of the plan year.
- Online access to account balances and claim history.
- A variety of online calculators to help determine contribution amounts and potential savings.
