Tax Saver Flexible Benefit Plans

Types of Tax Saver Plans

Premiums Only Plan:
If you enroll in the Premiums Only Plan, your premiums for medical, dental, vision, and life insurance offered through the Office of Group Benefits may automatically be deducted pre-tax from your paycheck before your taxable income is determined. There is no cost to participate in the Premiums Only Plan. There is no tax liability on the money put into the Premiums Only Plan.

If you enroll in the Premiums Only Plan and want to cancel any of the benefits that are being tax-sheltered under this plan, you may only do so if you experience a qualifying event (see "Changes in Participation During the Year" section). If you do not experience a qualifying event you may only cancel your participation during Annual Enrollment in April for a July 1st effective date.

You may add or change coverage during the plan year without a qualifying event; however, the change in premium will not be tax-sheltered.

Flexible Spending Accounts (FSA):
This benefit provides you with the opportunity to set aside tax-exempt dollars for out-of-pocket health care or dependent care expenses incurred by you and/or your eligible dependents. You must determine an annual amount to be withheld. Determine the amount to be withheld by forecasting your out-of-pocket health care and/or dependent care expenses for the entire plan year, plus the grace period (July 1 through September 15). This annual contribution amount is then deducted from your paycheck in equal installments. There is no tax liability on the money put into either the health care or dependent care spending account or on the money reimbursed through these spending accounts. For an example of tax savings, see the section entitled How Flexible Spending Accounts Save You Money.

The deduction is made before taxes are computed, thus making the spending account dollars tax-free. To access the money in your account, you must file a claim form requesting reimbursement for eligible, out-of-pocket expenses for which services have been rendered and paid. A list of eligible expenses is available in your Human Resource Management Office (in some cases you may access this information through your HR department's website).

Eligibility
Any active employee of the LSU System is eligible for participation in the flexible benefits plan provided the following:

• Employed at 75% of full-time effort or greater (at least 30 hours per week);
• Appointed for a duration of at least one semester or 121 days or greater

Effective Date of Coverage
You must enroll within your first thirty (30) days of full-time employment; your coverage will be effective the first of the following month after your first full calendar month of employment:

For example:

Date of Hire = August 20th, Effective Date = October 1st

• If you do not enroll within your first thirty (30) days of employment you must wait until Annual Enrollment in April for an effective date of July 1st.

Annual Enrollment
If you enroll in the Premiums Only Plan, your election automatically rolls over from one year to the next. This election may be canceled during the April annual enrollment (effective July 1st) or within 30 days of a qualifying event if cancellation is consistent with the qualifying event.

Since circumstances affecting out-of-pocket expenses are generally subject to change each year, you must re-enroll in the Flexible Spending Accounts (FSAs) each year during the April annual enrollment. Your FSA enrollment will not automatically carry over from year to year. If you choose not to re-enroll during April, your account will automatically cancel on June 30th.

Grace Period
There will be a 2-month grace period immediately following the end of each plan year for both Health Care and Dependent Care Spending Accounts. This extension will provide participants additional time to incur expenses for reimbursement from the previous year's account. The grace period will be available after the end of the Plan Year (June 30) from July 1 through September 15 for reimbursement from the previous year's spending accounts. In order to file claims during the grace period, a reimbursement request form must be submitted to your HRM Benefits Office within the specified timeframe.

If you submit claims that are incurred between July 1 and September 15, they will be reimbursed out of your previous year's account, first (i.e. for Plan Year 2005/2006, you incur a claim on August 15, 2006; this claim will be paid from your 2005/2006 spending account if there is remaining money). Once your balance is exhausted from your previous year's account, and if you have re-enrolled in a flexible spending account for the following year, new claims will be reimbursed out of the next plan year's account.

Changes in Participation During the Year
Due to the tax advantages you enjoy under this program, the Internal Revenue Service imposes some restrictions on changes you can make during the plan year. Once you have elected to participate in one or more of these accounts, you cannot change or revoke this election except during the April annual enrollment period (effective July 1st) or if you experience a qualifying event.

A qualifying event only allows for changes to an existing election. If you did not make an election to participate in the plan during annual enrollment or within 30 days of employment, a qualifying event will not allow for enrollment in the plan mid-year. The only exception to this rule is in cases where there is a loss of other coverage.
Qualifying events include:

1. Changes in Family Status:

• Change in legal marital status, such as marriage, death of spouse, divorce, legal separation, or annulment; or
• Change in number of dependents, such as birth, adoption or death of a dependent; or
• Change in employment status of you or your spouse; or
• An event that causes a dependent to satisfy or cease to satisfy the requirements for coverage due to attainment of age, student status, or any similar circumstance; or
• A change in place of residence of the employee, spouse, or dependent.

2. Changes required by judgment, decree or order resulting from a divorce, legal separation, annulment or change in legal custody

3. Entitlement to or loss of Medicare or Medicaid

4. Significant cost or coverage changes

5. FMLA qualified leaves of absence

6. Changes in a dependent care provider or cost of dependent care

Changes in Health Care FSA elections may be allowed for qualifying events that fall under a change in family status; however, no changes are allowed to Health Care FSAs for other qualifying events. Also, the change in your election must be consistent with your change in family circumstances and must be made within 30 days of the date of change.

 
Flexible Benefit Plans: Where are They Available? How Much Can You Contribute? What is the Monthly Fee?

Campus / Medical Center	Premiums Only	Healthcare Spending Account	Dependent Care Spending Account
Health Care Services Division Hospitals	Yes	Not available	Not available
LSU A&M College ( Baton Rouge)	Yes	Yes min. $100; max. $3,000 $3.00 per month	Yes min. $100; max. $5,000 $3.00 per month
LSU Agricultural Center	Yes	Yes min. $100; max. $3,000 $3.00 per month	Yes min. $100; max. $5,000 $3.00 per month
LSU at Alexandria	Yes	Yes min. $100; max. $3,000 $3.00 per month	Yes min. $100; max. $5,000 $3.00 per month
LSU at Eunice	Yes	Yes min. $100; max. $3,000 $3.00 per month	Yes min. $100; max. $5,000 $3.00 per month
LSU Health Sciences Center, New Orleans	Yes	Yes min. $100; max. $3,000 $3.00 per month	Yes min. $100; max. $5,000 $3.00 per month
LSU Health Sciences Center, Shreveport	Yes	Yes No min. – $3,000	Yes min. $300; max. $5,000
		$3.00 if enroll in one FSA; $5.00 if enroll in both FSAs
LSU in Shreveport	Yes	Yes $300 – $4,000 $3.50 per month	Yes min. $300; max. $5,000 no fee
Paul M. Hebert Law Center	Yes	Yes min. $100; max. $3,000 $3.00 per month	Yes min. $100; max. $5,000 $3.00 per month
Pennington Biomedical Research Center	Yes	Yes min. $100; max. $3,000 $3.00 per month	Yes min. $100; max. $5,000 $3.00 per month
University of New Orleans	Yes	Yes No min. – $4,000	Yes No min. – $5,000
		$2.75 if enroll in one FSA;$4.75 if enroll in both FSAs

How Flexible Spending Accounts Save You Money
Assuming an employee has an Annual Gross Income of $30,000 and is in a 15% tax bracket:

	With FSA	Without FSA
Gross Monthly PayMinus FSA Contribution	$2,500-$360	$2,500N/A
Taxable IncomeMinus Taxes	$2,140-$321	$2,500-$375
Net IncomePlus FSA Reimbursement	$1,819+$360	$2,125N/A
Total Monthly Pay	$2,179	$2,125
Monthly tax savings=$54.00; Annual tax savings = $648.88.
NOTE: Savings will be even greater for persons in higher tax brackets.

Types of Flexible Spending Accounts

HEALTH CARE Spending Account:
Qualifications and Eligible Expenses: Many health care expenses, such as co-payments and deductibles, are not fully reimbursed by health, dental or vision insurance and may be eligible for reimbursement through a Health Care FSA. For a detailed list of health care expenses that may qualify for reimbursement under the Health Care Account, contact your Benefits Representative.

How to Calculate Your Expenses: Use our worksheet to estimate health care expenses, which will not be reimbursed. But keep this in mind — IRS regulations state that if all the money in the account is not used by the end of the plan year, the remaining balance must be forfeited (known as the “Use-It-or-Lose-It Rule”). Therefore, you should be conservative in your estimates. It is better to estimate low rather than high since you will have to forfeit any money left in the account at the end of the plan year. After estimating your total health care expenses for the plan year, divide this amount by the appropriate number of pay periods left in the plan year to calculate your per-pay-period contribution amount. This amount will be deducted on a pre-tax basis.

DEPENDENT CARE Spending Account:
There are four conditions surrounding participation in Dependent Care Spending Accounts:

1. If you are married, generally both you and your spouse must be employed in order to use this plan to reimburse eligible dependent daycare expenses.
2. Your contribution may not exceed the lesser of your income or the income of your spouse. For example, if you earn $30,000 a year and your spouse earns $2,000 a year, your contribution may be no more than $2,000 for the year.
3. If you are married and file separate returns, your maximum contribution is $2,500.
4. If your spouse has a Dependent Care Account at work and you file a joint return, your combined total tax shelter for dependent care cannot exceed $5,000.

Qualifications: You may receive tax-exempt reimbursement for the care of certain individuals in your household, which include your dependent children age 12 or younger, and any other individuals who reside with you and who rely on you for at least half of their support or are physically or mentally unable to care for themselves.

Eligible Expenses: Eligible dependent care expenses are work-related expenses incurred for qualifying individuals. The account is designed to provide a tax saving so that you and your spouse can work. You are required to report on your annual federal income tax return the name(s) and tax identification number(s) of those providers of dependent care expenses whose expenses have been reimbursed to you through your Dependent Care Account.

Eligible Dependent Care Account expenses include:

• Daycare costs for children 12 and younger
• Schooling costs, not including food and clothing, for either private or public schools, for children not yet kindergarten
• If expenses for food and clothing cannot be separated from the total cost of child care, then they are eligible expenses
• If your child is 12 or younger and you pay for before/after-school care, it is reimbursable
• Babysitting and licensed daycare center costs
• Housekeeping services in your home that include daycare
• Elder care if dependent is claimed on your tax return
• Costs of transportation, overnight camping, nursing care facilities, and the schooling costs of children in the first grade or above are generally ineligible expenses

Federal Income Tax Credit for Dependent Care Expenses:
You cannot use both the tax credit and the spending account for the same dependent care expenses. Further, expenses eligible for the tax credit are reduced, on a dollar-for-dollar basis, by the amount you contribute to a dependent care spending account. This tax credit is an amount subtracted from the actual tax you owe when you file your annual tax return.

Determining whether it is more advantageous for you to open a spending account or file for the credit at the end of the year will depend on a number of factors and, therefore, must be made on an individual basis. The following principles, however, can be used as a general guide.

• As income rises, the tax credit decreases, whereas the tax savings on payments made through the Dependent Care Account become greater, because you are in a higher taxable income bracket.
• Savings from using the Dependent Care Account include Social Security/Medicare tax savings. These savings do not apply with the tax credit.
• The amount that can be reimbursed through the Dependent Care Account is not lowered when you have only one qualifying dependent, as happens with the tax credit. For example, if you have only one child but more than $2,400 of dependent care expenses, more expenses are reimbursable through the Dependent Care Account.

How Contributing to a Flexible Spending Account Affects Other Benefits
Benefits received through your Long Term Disability and Life Insurance are not reduced even though participating in the Premiums Only Plan makes it appear that you are making less money. These benefits are calculated on your gross earnings before pre-tax deductions are made. Similarly, your retirement benefit is not affected by your Flexible Benefits participation. If you are one of the few who pay Social Security tax, please note that, under present law, your earnings for the purpose of determining your Social Security benefits would be reduced by contributions made to the spending accounts or premiums withheld through the Premiums Only Plan.

If you are contributing to a supplemental retirement account, be aware that your Tax-Saver Flexible Benefits Plan contributions will not reduce the maximum that can be contributed to a tax-sheltered annuity.

What Happens to My Money When...
It is the End of the Year: IRS regulations state that if all the money in the account is not used by the end of the plan year, the remaining balance must be forfeited. This practice is commonly referred to as the “Use-It-or-Lose-It Rule.” Any remaining balances cannot be paid to you in cash, carried over to the next plan year, or made available to you in any other way. By being familiar with your level of expenses and planning care-fully, you can minimize this risk.

I Terminate Employment: You can continue to submit claims after your employment terminates. However, you may only submit claims for expenses incurred on or before the last day of the month in which your employment is terminated, unless you choose to make after-tax contributions to your spending account(s) through COBRA FSA. COBRA FSA requires after-tax contributions in order to keep the account active for reimbursements that may occur after the last day of the month in which your employment terminated. If you terminate employment mid-year, you must file claims within 120 days of the end of the month in which you terminate or within 120 days following the end of the plan year, whichever is sooner.

Filing FSA Claims
Filing a claim is as easy as completing a claim form and attaching a receipt. Timely filing of a claim will result in a timely reimbursement. It is an LSU System standard to have reimbursement within two weeks of filing. See your Benefits Representative for more details about procedures for filing claims and applicable deadlines. See your Benefits Representative for more details about procedures for filing claims.

All claims incurred during the plan year must be submitted within 120 days following the end of the plan year in order to be eligible for reimbursement. If you terminate employment mid-year, you must file claims within 120 days of the end of the month in which you terminate, or within 120 days following the end of the plan year, whichever is sooner.
 
WORKSHEET for ESTIMATING YOUR UNREIMBURSED HEALTH CARE EXPENSES
As part of your benefits program, you can decide to direct part of your salary to the Health Care Spending Account. This account permits you to pay for otherwise health care expenses, which will not be reimbursed on a pre-tax basis. This worksheet will help you estimate what expenses you are likely to face in the next plan year.

Remember the Use-It-Or-Lose-It Rule. Be conservative in your estimates. It is better to estimate less rather than more since you will have to forfeit any money left in your account at the end of the plan year.

For each of the following categories, estimate the amount of expenses you anticipate to incur in the coming plan year for which you do not expect to be reimbursed by your insurance carrier.

 
Medical deductible ............................................................... $__________._____
(Major medical and/or any per admission deductibles)
     
Dental deductible ................................................................. $__________._____

Co-payments: ...................................................................... $__________._____
(Your share of expenses after any deductibles, up to the out-of-pocket limit)      

Medical ................................................................................ $__________._____

Dental .................................................................................. $__________._____

Orthodontia .......................................................................... $__________._____

Vision ................................................................................... $__________._____

Prescription or Over-the-Counter Drugs .............................. $__________._____

Routine Physical Exams ...................................................... $__________._____

Other planned uncovered expenses .....................................$__________._____

TOTAL ESTIMATED HEALTH CARE EXPENSES ............. $__________._____

The Total Estimated Health Care Expenses figure is the maximum amount you should consider putting in your Health Care Account. This total amount will be divided by the appropriate number of pay periods to reach a per-pay period account deposit amount. The deposit amount will be deducted on a pre-tax basis saving you the amount of tax you normally would have paid on the deposit amount.