Flexible benefits coming

At a time when salary increases are at a minimum, the university’s executive leadership has established a new means by which to increase net disposable income — medical flexible spending accounts.

Employees will be able to invest in medical flexible spending accounts starting Jan. 1, 2004. These accounts let you deposit money from your before-tax salary and withdraw it tax-free as you incur eligible medical expenses.

Ultimately, this IRS-approved method allows participants to reduce their taxable income (and therefor their taxes), thereby stretching their spendable income.

For example, if a married employee with a gross salary of $30,000 paid 33.3 percent in taxes, his or her taxes would total about $10,000. If that same employee put $2,000 into an FSA, it would reduce his or her taxable income to $28,000. Since that 2,000 is pretaxed, that person would save approximately $666 in taxes ($2000 X 0.333 tax rate). That allows that person to stretch their income further.

Employees may sign up for medical flexible spending accounts during WSU’s benefits open enrollment period, now through Nov. 30. For more information and personalized help, attend the WSU Benefits Fair 10 a.m.-3 p.m. Wednesday, Nov. 5, in the atrium area between French Ad and Lighty. Information also is available the Benefit Services website, http://www.wsu.edu/benefits, where you can click on Medical Flexible Spending Account link, under Hot Topics.

Greg Streva, a WSU plumber/pipefitter/steamfitter and vice president of Local 1066, Washington Federation of State Employees, previewed the material on medical flexible spending accounts, and noted, “This program will save people money on their health care costs. I encourage every employee to participate.”

To participate in a medical flexible spending account, you designate an amount you expect to spend in 2004 on medical expenses, not including what your medical insurance plans would pay for. Be conservative when estimating your expenses because, if you end up not spending as much as you estimated, the IRS says you can’t get back the remainder or carry it forward for 2005.

However, quarterly statements showing your balance are provided, so people can spend their balance on medical related items before the end of the calendar year, thus allowing them to avoid most losses.

Payroll deductions to your flex account are made before taxes are assessed on your paychecks, so you save that money tax-free. As you incur medical expenses, you complete a reimbursement request form and submit it with receipts and insurance information. Your tax-free reimbursement typically is issued within five business days.

Expenses reimbursed from a flex account cannot be deducted on your federal tax return because they are already tax free.

WSU employees can use flex account funds for a wide variety of medical expenses, for themselves and eligible dependents. Some eligible expenses include doctor fees, prescriptions, some over-the-counter drugs, birth control, optometrist fees, ambulance service and, in some cases, vitamins, acupuncture, contact lenses, orthodontic care, weight-loss and smoking cessation programs.

Services not covered include insurance premiums, health club fees and some cosmetic surgery.

To help employees gauge how much they might deposit in a medical flexible spending account, there is a worksheet on the WSU Benefit Services website mentioned above. The site also provides many more details of how the flex plan works and how to enroll. If you have more questions, you can call Jan Rauk at 335-2523 or Marie Weiss at 335-4580.

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