AGENDA

2. AGENDA • A Flexible Spending Account overview • How it works • Health Care reimbursement account • Dependent Care reimbursement account • Important planning information • Submitting claims for reimbursement • 2009 Open Enrollment information • Resources The University of Arizona – Human Resources

3. FLEXIBLE SPENDING ACCOUNT OVERVIEW • Employer-sponsored plan • Pre-tax payroll deductions deposited into the Flexible Spending Account • Use these dollars for reimbursement of qualified out-of-pocket expenses • Pay less taxes • Increase your take-home pay • Two kinds of accounts • Health Care reimbursement account • Dependent Care reimbursement account The University of Arizona – Human Resources

4. HEALTH CARE REIMBURSEMENT ACCOUNT OVERVIEW • Reimbursement for qualified expenses • IRS definition “…costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part of the body.” IRS Pub. 502 • Includes: Medical, Dental, Prescription, Vision, Hearing, and Over-the-counter medications (under certain circumstances) The University of Arizona – Human Resources

5. HEALTH CARE REIMBURSEMENT ACCOUNT PROCESS • Estimate annual out-of-pocket expenses not covered by insurance • no minimum contribution per paycheck • $5,000 maximum annual contribution • Enroll in Flexible Spending Account in November • Incur eligible out-of-pocket expenses in 2009 • File claims and receive reimbursement The University of Arizona – Human Resources

6. Office visit co-pay Health care deductible Prescription co-pay Orthodontia expenses Prescription eyeglass and contact lenses Acupuncture Blood pressure monitor Hearing aids Over-the-counter medications (purchased to treat an existing or imminent medical condition) Allergy, cold, cough, flu, nasal, sinus Diabetic supplies Denture adhesive Sleeping aids Pain relievers, aspirin and non-aspirin HEALTH CARE REIMBURSEMENT ACCOUNT SAMPLE EXPENSES IRS Publication 502: Medical and Dental Expenses www.irs.gov/pub/irs-pdf/p502.pdf The University of Arizona – Human Resources

7. HEALTH CARE REIMBURSEMENT ACCOUNT W. & W. WILDCAT EXPERIENCE* Without FSA With FSA Annual Salary $30,000 $30,000 Office visits $ 150 Prescription co-pays $ 500 Dental deductibles $ 100 Prescription glasses/contacts $ 600 Over-the-counter medication $ 150 Total out of pocket expenses $1,500 Pre-tax deduction 0 1,500 Taxable Income $30,000 $28,500 Federal Income Tax 1,507 1,345 State Income Tax 347 309 Social Security (FICA) Tax 2,286 2,162 Total taxes 4,140 3,816 Net paycheck $25,860 $24,684 After-tax expenses 1,500 0 Actual take-home pay $24,360 $24,684 *Sample uses married with two exemptions; savings varies depending on employee’s tax situation $324 Annual savings The University of Arizona – Human Resources

8. HEALTH CARE REIMBURSEMENT ACCOUNT W. & W. WILDCAT EXPERIENCE* Without FSA With FSA Annual Salary $60,000 $60,000 Office visits $ 150 Prescription co-pays $ 500 Dental deductibles $ 100 Prescription glasses/contacts $ 600 Over-the-counter medication $ 150 Total out of pocket expenses $1,500 Pre-tax deduction 0 1,500 Taxable Income $60,000 $58,500 Federal Income Tax 5,976 5,734 State Income Tax 1,375 1,319 Social Security (FICA) Tax 4,572 4,448 Total taxes 11,923 11,501 Net paycheck $48,077 $46,999 After-tax expenses 1,500 0 Actual take-home pay $46,577 $46,999 *Sample uses married with two exemptions; savings varies depending on employee’s tax situation $422 Annual savings The University of Arizona – Human Resources

9. DEPENDENT CARE REIMBURSEMENT ACCOUNT OVERVIEW • Reimbursement for qualified dependent care expenses that are • necessary to allow you to work or look for work • necessary to allow your spouse to work, look for work, or be a full-time student • Must have custody of dependent more than 50 percent of the year • Special considerations for UA Child Care Voucher Program, Sick Child Program and Emergency/Back-Up Care Program participants • Employee out of pocket expenses and University contributions for these three pre-tax programs are included in the $5,000 annual maximum • Consult your professional tax advisor • Contact UA Life & Work Connections, at 621-4365 or visit http://lifework.arizona.edu/cc/ The University of Arizona – Human Resources

10. DEPENDENT CARE REIMBURSEMENT ACCOUNT SAMPLE EXPENSES • Child care • Nanny service • Nursery school • Expenses may be paid to a relative (child, parent or grandparent of participant) IF • caregiver is not under age 19 • caregiver is not a tax dependent of the participant IRS Publication 503: Child and Dependent Care Expenses www.irs.gov/pub/irs-pdf/p503.pdf The University of Arizona – Human Resources

11. DEPENDENT CARE REIMBURSEMENT ACCOUNT W. & W. WILDCAT EXPERIENCE* Without FSA With FSA Annual Salary $30,000 $30,000 Total dependent care expense $5,000 Pre-tax deduction 0 5,000 Taxable Income $30,000 $25,000 Federal Income Tax 1,507 966 State Income Tax 347 222 Social Security (FICA) Tax 2,2861,872 Total taxes 4,140 3,060 Net paycheck $25,860 $21,940 After tax expenses 5,000 0 Actual take-home pay $20,860 $21,940 * Sample uses married with two exemptions; savings varies depending on employee’s tax situation $1,080 Annual savings The University of Arizona – Human Resources

12. DEPENDENT CARE REIMBURSEMENT ACCOUNT W. & W. WILDCAT EXPERIENCE* Without FSA With FSA Annual Salary $60,000 $60,000 Total dependent care expense $5,000 Pre-tax deduction 0 5,000 Taxable Income $60,000 $55,000 Federal Income Tax 5,976 5,165 State Income Tax 1,375 1,188 Social Security (FICA) Tax 4,5724,158 Total taxes 11,923 10,511 Net paycheck $48,077 $44,489 After tax expenses 5,000 0 Actual take-home pay $43,077 $44,489 * Sample uses married with two exemptions; savings varies depending on employee’s tax situation $1,412 Annual savings The University of Arizona – Human Resources

13. IMPORTANT PLANNING INFORMATION • Use care when estimating expenses • Be conservative • Review, consider current year expenses • Do you anticipate similar expenses for 2009? • Use the worksheet • Track expenses in 2009 for enrollment in 2010 The University of Arizona – Human Resources

14. WHO IS ASI? • Third party administrator • Answers questions about this plan • Receives, reviews and approves claims • Sends reimbursement directly to you through • Direct deposit • Check mailed to your home address • (800) 659-3035 • www.asiflex.com The University of Arizona – Human Resources

15. 2009 OPEN ENROLLMENT • November 1 – 30, 2008 • Effective January 1, 2009 through December 31, 2009 • Enroll using Employee Link http://emplink.arizona.edu • Current participants must re-enroll to ensure participation in 2009 The University of Arizona – Human Resources

16. RESOURCES … • HR website (plan information) • www.hr.arizona.edu • Employee Link (to enroll) • http://emplink.arizona.edu • ASI (claims information) • www.asiflex.com • IRS Pub. 502 (medical/dental care) • www.irs.gov/pub/irs-pdf/p502.pdf • IRS Pub. 503 (dependent care) • www.irs.gov/pub/irs-pdf/p503.pdf The University of Arizona – Human Resources