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  1. BENEFLEX INC. Leading the way in FSAs flexible spending accounts made simple

  2. THERE ARE TWO TYPES OF FLEXIBLE SPENDING ACCOUNTS • Dependent care flexible spending accounts • Medical flexible spending accounts BOTH TYPES SAVE THE EMPLOYEE AND THE EMPLOYER MONEY!

  3. THE BASICS A Flexible Spending Account allows an employee to convert a taxable benefit (their salary) into nontaxable benefits. When an employee contributes to a spending account, they lower their Federal, Social Security and in some cases, State taxes and increase their spendable take-home pay! The higher the tax bracket, the more they can potentially save. By using TAX FREE dollars to pay for necessary qualified expenses, employees increase their spendable income and save taxes. Let’s start with the dependent care spending account . . .

  4. The DEPENDENT CARE SPENDING ACCOUNT is governed by a Federal tax law that allows employees who require daycare for their dependents, in order to work, to pay up to $5,000.00 of qualified childcare or eldercare expenses with money from their paychecks BEFORE any taxes are removed. Eligible Dependents Include: • Your child age 12 or younger of whom you have custody and for whom you are entitled to claim as a deduction on your federal tax return. For children of divorced or separated parents, only the parent with custody can consider the child an eligible dependent under this plan. • Your child of any age who is physically or mentally unable to care for him/herself. • Your spouse who is physically or mentally unable to care for him/herself. • The parents of you or your spouse who are tax dependents, reside in your home and are incapable of self care.

  5. So Why Choose Beneflex? Because we keep it simple for both employers and employees You would think that employees would jump at the chance to pay $5,000 worth of daycare or eldercare expenses on a tax-free basis and have $1,800.00 or more spend able income per year. Unfortunately, most dependent care spending accounts are as much a burden on employees as they are a benefit. The normal burden associated with the plan creates a low participation rate from employees. Due to low participation rates by employees, due to the hassle of saving receipts and waiting to be reimbursed, EMPLOYERS often ignore dependent care FSAs and fail to offer a benefit that actually SAVES them money. BENEFLEX is the FSA plan that simplifies dependent care spending accounts, increases employee participation and SAVES THE EMPLOYER MONEY!

  6. THE PROBLEM Parents usually live from paycheck to paycheck. The typical plan requires that the money is deducted from the employees check but before the employee has access to their money they must pay their provider, obtain a receipt, turn the receipt into the administrator and wait to be reimbursed. Reimbursement can take up 3 to 4 weeks. Meanwhile, the employee is paying double daycare. Where was the benefit in this? We don’t believe there was a benefit because the typical employee simply can not afford to participate.

  7. THE BENEFLEX SOLUTION The Beneflex "IRS approved" direct-pay system eliminates the hassles employees normally have to commit to in order to participate.WE PAY THE DAYCARES DIRECT! Employees have no weekly checks to write to daycares No Receipts to keep The same week money is deducted from their paycheck, their daycare is paid directly from Beneflex! BEST OF ALL THERE IS NO WAITING TO BE PAID BACK

  8. We can PRACTICALLY guarantee greater employee participation. It’s as simple as 1 - 2 - 3 The employee elects to participate and chooses the amount that their salary is reduced each pay period 2. The employer sends the funds to Beneflex Beneflex pays the daycare provider directly the same week the employees salary is reduced Employees can now afford to participate !

  9. Beneflex pays daycare providers Weekly or Monthly We prefer to pay via electronic funds transfer so that the provider is guaranteed that their payment is in their checking account Friday of each week or if paid monthly, the 1st Friday of the month. We also pay by check if requested. Checks are mailed on Friday of each week. However, this method leaves the provider at the mercy of the postal service. The $5,000 breakdown • Employee paid monthly pre-tax deduction = $ 416.66 • Employee paid semi-monthly pre-tax deduction = $ 208.33 • Employee paid bi-weekly pre-tax deduction = $ 192.30 • Employee paid weekly pre-tax deduction = $ 96.15 Often, an employees daycare exceeds $5000 per year. Beneflex allows employers to deduct and send the amount above $5000 on a post-tax basis. This allows BENEFLEX to pay the daycare the total amount required and saves the employee the trouble of writing a check for any extra amounts needed. THERE IS NO CHARGE FOR THIS EXTRA FEATURE

  10. These new rules make losing money almost impossible • Your provider goes up on the cost (you can automatically increase your childcare deduction to the new amount if the care provider is not your relative). Your care provider reduces their charge (you can automatically decrease your childcare deduction to the new amount charged). • You change care providers (you can adjust your childcare deduction up or down to the amount charged by the new care provider even if one of the providers is your relative). • Your need of coverage changes (your school-age child who normally requires after-school care only needs full-time care during the summer (you can increase or decrease your childcare deduction to the new amount charged). Employees NEED this benefit!

  11. Without our Plan $3000 Gross Wage With Our Plan $3000 Gross Wage Taxable Daycare $416.00 Non-Taxable Daycare $416.00 Taxable Wages $3,000 Taxable Wages $2,584.00 Taxes Deducted (35.65%) $1,069.50 Taxes Deducted (35.65%) $921.20 Take-Home Pay $1,930.50 Take-Home Pay $1,662.80 Daycare not yet paid $416.00 Daycare already paid Spend able Take-Home Pay $1,514.50 Spend able Take-Home Pay $1,662.80 LACK OF EDUCATION EQUALS LACK OF ENROLLMENTS EZ explanation The employee has $148.30 more spendable income each month which is a yearly increase of $1,779.60 They earned it…they might as well keep it!

  12. What’s in it for the employer? happy employees with more spendable income & The employer enjoys a savings equal to 2% of the redirected amounts through reduced payroll taxes! The employer does not have to pay the matching FICA taxes on the Dependent Care Assistance Program funds redirected by its employees. Since our administrative cost is only 5.65%, the employer has a 2% savings of the funds redirected by its employees. • NO OTHER COSTS TO THE EMPLOYER • NO MINIMUM NUMBER OF PARTICIPANTS REQUIRED The benefit employers can no longer afford to ignore !

  13. The Medical Flexible Spending Account From the employee's point of view it's nearly impossible to find a health plan that covers all costs. There will undoubtedly be expenses that are covered only partially or not at all. Co-pays and deductibles add up fast ! These needs led to the birth of Medical Flexible Spending Accounts (MedFSA's), established under Section 125 of the Internal Revenue Service Code. When an employee contributes to a MedFSA, they lower their Federal, Social Security and in some cases state taxes and increase their spendable income The higher the tax bracket, the more they can potentially save.

  14. What kind of things does a MedFSA cover? too many things to list on this presentation . . . • Learning Disabilities (tuition or fees for special schools) • Legal Fees (to authorize treatment for mental illness) • Mental Nervous Disorder • Nursing Services • Obstetrical Expenses • Operations if Medically Necessary • Orthodontic Treatment • Orthopedic Shoes • Over-the-Counter reading Glasses • Oxygen • Periodontal Fees • Prescription Drugs (drugs with RX#) • Psychiatric Care • Psychoanalysis • Radial keratotomy • Surgery • Telephone for the Deaf • Transplants of Organs • Vaccinations • Walkers • Wheelchairs • X-rays • Acupuncture • Alcoholism Treatment • Ambulance Costs • Artificial Limbs and Teeth • Car Controls For Handicapped • Chiropractors • Contact Lens Solutions and Cleaners • Contact Lenses • Contact Lens Replacement Coverage • Co-pays • Crutches • Deductibles • Dental Exams and Cleaning • Dentures • Diagnostic Tests • Drug and Alcoholism Treatment • Experimental Medical Treatment • Eye Examinations • Eyeglasses • Hearing Devices and Batteries • In Patient Therapy • Laboratory Fees

  15. How the MedFSA Works The employer sets the minimum & maximum limits "Use it or lose it." This means that if an employee elects $500 in the health FSA, for example, and only uses $450 and does not use the remaining $50, this is forfeited to the employer. This is inherent in group insurance policies. If you are enrolled in a medical policy and do not use it in the policy year, you are not given a refund. Why? For the price of the premium you transferred your “risk” of illness to the insurance company. So it is with a MedFSA. Your election is your premium and any risk is shifted to the employer. In reality there is little risk of losing money if the employee sets aside money for expenses that he is sure to use. "Availability" rule. Example, when an employee enrolls in a health FSA, in the amount of $600 and has a claim of $300 at the beginning of the plan year, the employer is required to make available" the $300. Since, the employer, by offering a MedFSA is acting as an insurance company by "fronting" these dollars, the employer is also entitled to any forfeitures. Some employers are concerned about this possible exposure. Because, at the beginning of the plan year several employees could draw down the employee pool of MedFSA dollars and the employer would have to make up the difference in the pool. This is a temporary experience and is rapidly made up by continuing payroll deductions. The medical expenses only have to be incurred to be reimbursed

  16. It Pays to Participate A Flexible Spending Account allows an employee to convert a taxable benefit (their salary) into nontaxable benefits. For every dollar the employees run through a MedFSA plan, the employer saves the 7.65% FICA tax (Social Security). For example, if after enrolling in a MedFSA plan, the employees collectively moved $100,000 pretax, the employer would save $7,650.00 Since Beneflex only charges $5.00 per participant per month (reduced to $4.00 if they are offering the Dependent Care Benefit), the FICA savings can easily be figured to cover the fee by employers setting a minimum and maximum contribution to the plan. If your employees are paying too much in taxes, then so is your company.

  17. Beneflex…a step ahead We are as paperless as the law allows • Each time a non-insured qualified medical expense is incurred, the employee submits a Reimbursement Request Voucher along with copies of the charges. • If the reimbursement request is received prior to Monday by 4 pm CST, the medical reimbursement is deposited directly into the employee’s designated bank account the following Friday. • Each Monday, Beneflex processes all claims and notifies the employer of each participant’s claim and total of Thursdays MedFSA draft. Employer has until Wednesday noon to make modifications. • Beneflex drafts the MedFSA account as needed each Thursday. • Employers are sent a fee statement the 28th of each month. • Employers are given a report each month showing year to date activity. • Employees receive a quarterly statement of their account from Beneflex.

  18. EASY EFFECTIVE EFFICIENT Use Beneflex Flexible Spending Accounts You’ll Be Happy You Did ! Beneflex Inc. 800-925-4087