To maximize the success of flexible spending accounts, benefits managers need to clear up employees’ confusion and pass vital info along in the most efficient manner possible.
Here are several areas of flex accounts that often trip up employees:
- Contribution rates. More employees than you’d think are unclear about the actual meaning of a “pretax benefit,” like an FSA. Solution: Provide a concrete example for. For instance, ask employees how much they expect to pay for out-of-pocket medical expenses throughout the year, then show them how much they’d end up paying with tax.
Example: Three hundred dollars in an FSA would end up being roughly $384 of taxable income. Seeing an actual dollar amount in connection to the FSA can go a long way with on-the-fence staffers. (Note: Make sure employees are well aware of the maximum dollar/maximum salary percentage that can be contributed to your FSA.)
- Eligible expenses. While most employees know that FSAs reimburse out-of-pocket costs that aren’t covered (i.e., co-pays, deductibles, vision, dental, etc.), some may not be aware that over-the-counter meds are also an eligible expense. The key is to ensure employees know all of the expenses their FSA money can be used to reimburse.
- Benefits combinations. Many firms offer additional pretax benefits, such as a 401(k). Encouraging employees to contribute to an FSA — even if it’s a very small amount — when your company has multiple pretax benefits gives them an added bonus. By placing money in multiple pretax benefits, employees effectively cut their taxable income.