Commonwealth of Massachusetts GIC Flexible Spending Account Program

1. Commonwealth of Massachusetts GIC Flexible Spending Account Program

2. Agenda • Welcome & Introductions • Payroll Coordinator Packets • Flexible Spending Account Administration • How You Can Help • How Benefit Strategies Can Help You • Questions / Wrap-up

3. Payroll Coordinator Packets • Employee and Payroll Coordinator letters – Payroll Coordinators should distribute the enclosed employee letter • 2014 Enrollment Form – We encourage all existing participants to re-enroll online during open enrollment, new hires will need to complete this paper enrollment form. Please make sure the forms are completed in their entirety and the bottom section is filled out completely by the payroll coordinator prior to sending to Benefit Strategies. These forms are due no later than December 13, 2013 to Benefit Strategies. • Claim Form and Physician Statement – Copies can also be found at www.benstrat.com • Copy of today’s presentation • Brochure and Poster – Payroll Coordinators should display the enclosed poster and distribute the brochure

4. What is a Flexible Spending Account (FSA)? A Flexible Spending Account (FSA) is an employee benefit program that allows participants to set aside money on a pretax basis for certain kinds of expenses. A FSA provides tax savings to offset the rising cost of health and day care expenses.

5. How Does the FSA Work? • Employee elects to participate and enroll on an annual basis • Pre-tax premiums (annual election divided by number of pay periods) are reduced from participant’s pay checks • Participant/Dependent(s) uses their FlexExpress card to pay for out of pocket HCSA expenses and funds are reduced from their account immediately upon use • Participant files claims online and uploads receipts for DCAP or files a manual claim for reimbursement and receives a check or direct deposit for the amount requested • Participants are required to keep a copy of all receipts per IRS regulations • A monthly fee of $3.60 for HCSA and/or DCAP will be charged to maintain the accounts

6. Helping Employees Effectively Enroll • Assist employees to understand and maximize the financial and tax benefits provided by the plan • Explain that employees should be aware of their health care costs: • How much do we spend a year on prescription drugs? • How often do we visit the doctor? • How many dental visits do we need this year? • What are my health insurance co-payments and deductibles? • Teach employees to better manage their health care • Understanding what is and isn’t considered dependent care eligible and when it can and cannot be used

7. Flexible Spending Accounts – Election Limits

8. Types of FSAs Health Care Spending Account (HCSA) For your family’s out-of-pocket medical expenses Eligible health care expenses include, but are not limited to: • Deductibles, coinsurance and co-payments • Prescription drugs and vaccinations including co-payments • Vision care • Dental expenses • Chiropractor’s care and treatment • Hearing Care Dependent Care Assistance Account (DCAP) For your eligible dependents daycare expenses that you incur to allow you and your spouse (if applicable) to be gainfully employed. A qualifying child or dependent is someone under age 13, or physically/mentally incapable of caring for him/herself and doesn’t have income in excess of IRS tax code.

9. Health Care Spending Account (HCSA) • For eligible healthcare expenses not paid by insurance • Annual election is available the first day of the plan year • If a participant separates from the plan, they are eligible for the entire annual election regardless of their contributions, however they can only file for dates of service prior to the termination date (participant may choose to continue the plan through COBRA) The 2013 maximum HCSA election amount has been reduced from $5,000 to $2,500 pursuant to Federal Health Care Reform Law. The minimum election for HCSA remains at $500

10. HCSA Eligible Expenses Doctors Fees and Expenses • Ambulance • Co-payments • Deductibles for medical or dental • Hospitalization • Laboratory fees • Physicals • Vaccinations and immunizations Dental Care • Dental bridges • Dental crowns • Implants • Orthodontia • Routine dental cleanings Treatment, Therapy, and Wellness Programs • Acupuncture by a licensed practitioner • Chiropractors • Hypnosis for treatment of an illness • Massage therapy* • Mental health care • Therapy by licensed therapists • Weight loss programs* Vision Care • Contact lenses • Eye exams • Eyeglasses • Lasik eye surgery • Prescription sunglasses *Must be medically necessary, meaning you have a qualifiedmedical diagnosis and a recommended treatment plan from a health care professional. Claims must be filed manually accompanied by the physician's statement (required each year) which can be found on our website or a prescription.

11. HCSA Eligible Expenses (Continued) Over-the-counter Supplies • Athletic treatments • Bandages • Blood pressure monitors • Cholesterol meter test kit and supplies • Contact cleaning • Crutches, canes, walkers • Diabetic monitors and supplies • Eye glasses • Eye related equipment • Family planning products • Fertility monitors • First aid kits • Hearing aids and batteries • Insulin test strips, testing materials and supplies • Medical monitoring and testing devices • Orthopedic and surgical supports • Pregnancy tests • Urological products • Wheelchair and repairs Note: Over-The-Counter drugs and medicine are only eligible for reimbursement through the FSA if accompanied by a doctor’s prescription.

12. Ineligible HCSA Expenses • Cosmetic services (unless resulting from disease or illness) • Expenses claimed on tax return • Expenses reimbursed by other sources (insurance) • Fees for exercise or health clubs (unless prescribed by a physician for a medical problem) • Hair transplants • Insurance premiums • Vitamins for general well-being • Weight loss programs for general well-being

13. Dependent Care Assistance Program (DCAP) • For eligible dependent care expenses that allow the employee (or the employee and their spouse, if married) to work or look for work, or that allows the spouse to attend school full time. • Expenses must be for a dependent you can claim on your income tax return, who is under age 13, or physically/mentally incapable of caring for him/herself • Your dependent must live in your home at least 8 hours per day • Funds are available as contributions are made • If a participant separates from the plan, they are eligible up to the contribution amount for any dates of services within the plan year DCAP maximum: $5,000 per household* ($0.00 minimum) *Household maximum per plan year as per IRS

14. Eligible Dependent Care Assistance Program Expenses • Care for dependent children up to 13th birthday • A person of any age who can be claimed as a dependent on federal income tax return and who is mentally or physically incapable of self care • Child care at a daycare center, day camp, nursery school or by a private sitter • Before and after-school care (not tuition) • Housekeeper caring for an eligible dependent • Au Pair placement fees and weekly stipend

15. Ineligible Dependent Care Assistance Program Expenses • Education or tuition fees • Late payment fees • Overnight camps (in general) • Agency fees for finding a care provider • Sports lessons, field trips, clothing • Mileage reimbursement to/from the care provider

16. Comparison of Post-Tax versus Pre-Tax Savings

17. “Use It or Lose It” Rule • Participants forfeit money unspent at the end of the plan year • IRS Rule (Section 125 of IRS Code) • Funds cannot be rolled over to the next plan year and cannot be paid out without eligible expenses • Participants must plan carefully when making elections • Healthcare and Dependent Care Accounts are eligible for a 2 ½ month extension to spend down balances

18. Grace Period for Healthcare and Dependent Care Expenses • Participants have a 2 ½ month grace period (until March 15th), following the end of the plan year, to incur eligible Healthcare and Dependent Care expenses • All claims must be filed by April 15th following the end of the plan year • All funds not spent or claimed by April 15th will be forfeited

19. How Grace Period Claims Are Paid • If a participant has an available prior plan year account balance and is also participating in the current year plan • Expenses are paid from the prior plan year first for debit card or manual claim submission • Based on what claim/debit card transaction is recorded first (not what the earliest Date of Service is) Not applicable to participants with a $0 prior plan year account balance or if participant did not have a prior plan year account

20. Methods of ReimbursementFlexExpress Debit Card (HCSA only) • Easy access to healthcare account funds • Free set of 2 cards to all enrolled participants ($5.00 per additional set of cards) • Use for co-pays, deductibles, co-insurance and other items not covered by insurance and over-the-counter medications • Funds are deducted immediately from your HCSA • No need to file claims • Updates your account balance and transaction history • Participants must retain all receipts – IRS mandate

21. Methods of Reimbursement (continued) Online Reimbursement • Submit and upload a claim online by logging into your personalized FSA account. • Browse to your computer and upload a scanned receipt or • Take a picture of your receipt with your mobile phone and upload it using an iPhone or Android. • If you do not upload a receipt, print the confirmation page and send in to Benefit Strategies with a copy of your receipt for processing. Paper Claim Form • Claim Forms can be found online at www.benstrat.com. • Submit completed paper Reimbursement Request Form along with a copy of the detailed documentation of expenses. • Claims will be reimbursed within 3 – 5 business days of receipt.

22. Leave of Absence Policy • When participants go out on a leave of absence (paid or unpaid) please review the GIC Participant Handbook • Participants are responsible to contact both the Benefits Office/Payroll Coordinator and Benefit Strategies to set up their leave options for flex benefits • There are two types of leaves: Paid and Unpaid

23. Leave of Absence - Paid • HCSA – during a paid leave of absence your HCSA will continue the same as if you were not on a leave of absence. Deductions will continue to be taken from your pay each pay period. Expenses can be incurred before, during or after the LOA. • DCAP – during a paid leave of absence your DCAP will continue to have deductions taken while you are out. Expenses can only be incurred before or after the LOA. No expenses may be reimbursed that were incurred while on the LOA.

24. Leave of Absence – Unpaid Prepay HCSA: • Participants enrolled for HCSA benefit have the option of having a pre-tax deduction lump sum taken from their last check before the unpaid leavestarts to cover the period of time that no payroll deductions are being taken – with this option, the flex debit card remains active and participants are able to continue using their HCSA funds and submit claims. Example of Unpaid Leave of Absence Pre-pay (HCSA): Jane Smith is going on an unpaid Leave of Absence from 7/1-7/31 and is enrolled in an HCSA account. In order to use her HCSA account while on the unpaid Leave of Absence she will have the two HCSA deductions that would have been taken in July taken out of her last June paycheck before the unpaid leave. Now she can incur expenses while on the unpaid leave.

25. Leave of Absence – Unpaid Prepay DCAP: • Participants enrolled for DCAP benefit are urged to stop their payroll deductions while at home as the IRS regulations state that you must be at work or a full time student in order to be able to use the benefit. • If you think you can claim your full election using dates of service that are not during your leave, you can choose the option to pre-pay your DCAP contributions similar to the HCSA pre-pay option. Example of Unpaid Leave of Absence Pre-pay (DCAP): Jane Smith goes out on an unpaid maternity leave from 7/1-7/31 and is enrolled in a DCAP account. Jane’s annual election is $5,000 for DCAP. If Jane thinks she has enough expenses incurred between 1/1-6/30 and 8/1-12/31 to use the full $5,000 she can pre-pay her July deductions prior to going out on the leave on a pre-tax basis to use for dates of service while active. She will not be able to use her DCAP account for dates of service while on the leave per IRS guidelines.

26. Leave of Absence – Unpaid Direct Bill HCSA: • Participants enrolled for HCSA benefit have the option of having their flex benefit premiums and administration fees directly billed by Benefit Strategies, LLC while on the leave of absence. This process must be requested directly to Benefit Strategies, LLC in writing by sending an e-mail to flexgic@benstrat.com before the leave starts. The employee will then be invoiced from Benefit Strategies, LLC every two weeks with the amount due and the premium can be paid by check or money order no later than the pay date on which the employee would’ve received a paycheck had they been active. So long as payments are made in a timely manner the flex debit card remains active and participants are able to continue using their HCSA funds and submit claims. These direct bill deductions will be post-tax since they are not occurring through payroll. Example of Unpaid Leave of Absence Direct Bill (HCSA): Jane Smith is going on an unpaid Leave of Absence from 7/1-7/31 and is enrolled in an HCSA account. In order to use her HCSA account while on the unpaid Leave of Absence she will have to request in writing to Benefit Strategies, LLC to be direct billed for the July premiums. .

27. Leave of Absence – Unpaid Direct Bill HCSA: • Participants enrolled for HCSA benefit have the option of having their flex benefit premiums and administration fees directly billed by Benefit Strategies, LLC while on the leave of absence. This process must be requested directly to Benefit Strategies, LLC in writing by sending an e-mail to flexgic@benstrat.com before the leave starts. The employee will then be invoiced from Benefit Strategies, LLC every two weeks with the amount due and the premium can be paid by check or money order no later than the pay date on which the employee would’ve received a paycheck had they been active. So long as payments are made in a timely manner the flex debit card remains active and participants are able to continue using their HCSA funds and submit claims. These direct bill deductions will be post-tax since they are not occurring through payroll. Example of Unpaid Leave of Absence Direct Bill (HCSA): Jane Smith is going on an unpaid Leave of Absence from 7/1-7/31 and is enrolled in an HCSA account. In order to use her HCSA account while on the unpaid Leave of Absence she will have to request in writing to Benefit Strategies, LLC to be direct billed for the July premiums.

28. Leave of Absence – Unpaid Direct Bill DCAP: • Participants enrolled for DCAP benefit are urged to stop their payroll deductions while at home as the IRS regulations state that you must be at work or a full time student in order to be able to use the benefit. • If you think you can claim your full election using dates of service that are not during your leave, you can choose the option to direct bill your DCAP contributions similar to the HCSA direct bill option. Example of Unpaid Leave of Absence Direct Bill (DCAP): Jane Smith goes out on an unpaid maternity leave from 7/1-7/31 and is enrolled in a DCAP account. Jane’s annual election is $5,000 for DCAP. If Jane thinks she has enough expenses incurred between 1/1-6/30 and 8/1-12/31 to use the full $5,000 she can have her July deductions direct billed while out on leave on a post-tax basis to use for dates of service while active. She will not be able to use her DCAP account for dates of service while on the leave per IRS guidelines.

29. Leave of Absence – Unpaid Make up HCSA: • Participants enrolled for HCSA benefit have the option of having pre-tax deductions taken from their pay checks after the unpaid leave has ended. With this option, the flex debit card is suspended and no claims can be incurred while on the leave. When an employee returns back to work and on payroll, the payroll coordinator needs to recalculate the remainder election balance over the rest of the number of pay periods in that plan year. Example of Unpaid Leave of Absence Make Up (HCSA): Jane Smith goes out on an unpaid leave from 7/1-7/31 and is enrolled in a HCSA account. Jane’s annual election is $2,500 with a year to date total contribution of $1,200 as of 7/1. Jane’s remainder premium of $1,300 will resume on 8/1 and will be divided over the remainder 11 pay periods at $118.18.

30. Leave of Absence – Unpaid Make up DCAP: • Participants enrolled for DCAP benefit are urged to stop their payroll deductions while at home as the IRS regulations state that you must be at work or a full time student in order to be able to use the benefit. • If you think you can claim your full election using dates of service that are not during your leave, you can choose the option to direct bill your DCAP contributions similar to the HCSA direct bill option. Example of Unpaid Leave of Absence Make Up (DCAP): Jane Smith goes out on an unpaid maternity leave from 7/1-7/31 and is enrolled in a DCAP account. Jane’s annual election is $5,000 for DCAP. If Jane thinks she has enough expenses incurred between 1/1-6/30 and 8/1-12/31 to use the full $5,000 she can have her July deductions taken from her pay checks after the unpaid leave has ended. She will not be able to use her DCAP account for dates of service while on the leave per IRS guidelines. Jane has a year to date total contribution of $2,500 s of 7/1. Jane’s remainder premium of $2,500 will resume on 8/1 and will be divided over the remainder 11 pay periods at $227.27.

31. Paid Leave Changed to Unpaid Leave • If you have a participant who goes out on a Paid Leave that converts into Unpaid Leave (employee ran out of paid time off) the process and options of Prepay or Direct Billing must be completed before the change in leave occurs and payroll deductions are stopped suddenly

32. Paid Leave Changed to Unpaid Leave • Susan Smith is on maternity leave 6/01/2013- 8/1/2013 • Susan will use 6 weeks of paid leave (maternity, vacation and etc.) and continue to make her PR contributions through 7/13/2013 pay period • Her maternity leave is converting from paid leave to unpaid leave from 7/14/2013 until 8/01/2013. Susan will not be able to use her HSCA benefit or FlexCard during the July 15th -August 1st“Blackout” period, UNLESS she • Arranges for and makes direct payments to Benefit Strategies PRIOR to the payroll contributions/deductions stopping OR • She can prepays the employee contributions that will not be deducted from payroll.

33. Returning from an Unpaid Leave Returning from an unpaid leave of absence is not a qualifying event to terminate your account. If you return on payroll during the plan year you have two options: • You may continue your original annual election with payroll deductions recalculated for the remainder of the year. • You can also choose to lower your election to the amount you have contributed as long as you have not spent more than you have contributed (HCSA). For example: If you elect $2,000 as your HCSA goal amount and have total year to date payroll deductions of $1,000 before your leave, if you have not exceeded $1,000 in expenses you can lower your goal amount to $1,000 for the remainder of the year. However, if you used more than you’ve contributed, such as $1,500, you can only lower the goal amount to $1,500 for the remainder the plan year.

34. New Hire Benefit Effective Date • When your employee is a new hire, per the GIC Participant Handbook, there is a 60 day waiting period before the employee is eligible to enroll in the HCSA benefit, please use the payroll calendar on the next page to best help you determine the effective date of a new hire • Enrollment for DCAP benefit does not have a waiting period, is effective immediately from hire date • Example: Susan Smith hired on 6/15/2013 would have an HCSA effective date of 9/1/2013 and a DCAP effective date of 6/15/2013.

35. Payroll Calendar

36. DOMA CHANGES • On June 26, 2013, the Supreme Court ruled in the United States v. Windsor that the Defense of Marriage Act (DOMA) is “unconstitutional” and “invalid” • The GIC offered employees a window of 30 days where they could enroll for the first time for HCSA/DCAP or increase original elections between 6/26/2013 – 7/26/2013 • Benefit Strategies received and processed 5 new enrollments, and 22 increases during that time • During the Open Enrollment period for 2014 plan year, employees whom did not get a chance to enroll or increase their elections due to the overturn of DOMA can do so now for benefit effective January 1, 2014

37. Participant Online Services • Track Account balances at www.benstrat.com • GIC has their own FSA page (click on the GIC icon in lower right hand side of home page) • Participant will need to log on using assigned username and password • Sign up for Direct Deposit to receive reimbursements directly to your bank account • Include email address on claim forms and receive a monthly email statement of account • Re-enrollment for current participants at login above

38. Mobile Technology iPhone and Android Mobile Applications • Applications can be found via • Apple App Store • Google Android Market • Through the application the following information is accessible • Available balance • Important filing dates • View all claims that require a receipt and allows you to submit those receipts using the mobile device’s camera! Text Message Alerts • You can receive notifications about the following: • Mobile Receipt Reminders • Mobile Claim Confirmation • Mobile Denial • Simply login to your account to opt in and out of the text messages communications at any time! Detailed instructions can be found on our website www.benstrat.com

39. 2014 Payroll Audit Process • Any participant not on each payroll file will immediately have their debit card and account placed on hold until the issue is resolved • Division POC will be notified via email when an account is placed on hold • When issue has been resolved, debit card will be reactivated and there won’t be a gap in coverage

40. GIC Refund Process When requesting a payroll refund check from Benefit Strategies, please follow these instructions: • The Group Insurance Commission will approve all payroll refund requests. • Benefit Strategies will research all payroll refund requests. • Send the request via email to Karin.Eddy2@state.ma.us • You must include the following information: • Employee Name • Employee ID • Deduction code(s) and amount(s) of refund; e.g. DCAP $50, HCSAF $3.60 • Reason for the refund; e.g. terminated state service, deduction taken in error • Name and address to send the refund check:  All refund checks will be made out to the Commonwealth of Massachusetts.  The agency will have to refund the employee. In order to avoid refund requests, be sure to enter the correct deduction code(s), deduction amount(s) and to end date deduction(s) when entering terminations/leaves of absence.

41. How You Can Help - Enrollments OPEN ENROLLMENT FOR 2014 GIC HCSA/DCAP OCTOBER 14th to DECEMBER 6TH Assist participants on the advantages of being enrolled in a FSA: • Display the poster and encourage employees sign up or call us with questions • Send reminder emails to employees regarding open enrollment • Photocopy and distribute the employee letter • Forward GIC emails about open enrollment to your employees • Call Benefit Strategies if you need more information, handouts or have any additional questions

42. Working with Benefit Strategies • Collect all HCSA/DCAP enrollment forms/online confirmation pages (signed and dated). • Return all completed paper enrollment forms to Benefit Strategies by December 13, 2013. (Benefit Strategies does not need the online confirmation pages) • HR/CMS Agencies and UMASS: Enter both the DCAP and/or HCSA and HCSAF deductions into HR/CMS. The HCSAF fee is for either or both programs – HCSA and DCAP • Review payroll calendar for 2014 to ensure deductions are entered correctly. Both the HCSA/DCAP and the HCSAF deductions will be deducted each pay period. • In order to prevent payroll errors in 2014, please carefully review the enrollment forms and the payroll deductions, codes, beginning and end dates entered into the payroll system • The deductions should be entered into the payroll system by December 26, 2013 for the January 3, 2014 payroll including the HCSAF fee

43. How Benefit Strategies Can Help YOU! • Final enrollment roster will be sent by Benefit Strategies to the division’s Payroll Coordinators on December 18, 2013. • If there is an employee on the enrollment report that the payroll coordinator doesn’t have an enrollment form for, or the online enrollment confirmation, the Payroll Coordinator must contact that employee to obtain one on file and update the payroll for 2014. • If you have an enrollment form for someone that is not on the enrollment reports, notify Benefit Strategies ASAP.

44. How Benefit Strategies Can Help YOU! Fast, friendly customer service and administrative support! 1-877-FLEXGIC (353-9442) Dedicated Account Manager Jasmine Shamer FlexGIC@benstrat.com

45. Questions? Thank you!