Commonwealth of Virginias Flexible Benefits Plan Administered by the Department of Human Resource Ma

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Commonwealth of Virginias Flexible Benefits
Plan Administered by the Department of Human
Resource Management
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The Flexible Benefits Program has three parts

• Premium Conversion
• Medical Reimbursement Account
• Dependent Care Reimbursement Account

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PREMIUM CONVERSION

• You save by paying your portion of
• health insurance premiums before
• taxes are calculated.
• All employees enrolled in a health benefits plan
  are automatically enrolled in
• Premium Conversion

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What Is A Flexible Reimbursement Account (FRA)?

• IRS-approved tax-free account
• Saves participants on non-covered medical
  dependent expenses
• Allows participants to designate a portion of
  their paycheck to be set aside for eligible
  medical and dependent expenses pre-tax
• These funds are free of federal income tax, some
  states income taxes and social security taxes

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A Flexible Reimbursement Account is NOT an
insurance plan!

• A Flexible Reimbursement Account can be utilized
  for expenses that medical insurance will not
  cover.
• A Flexible Reimbursement Account can be utilized
  for dependent care expenses.

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Two Types of FRAs
Medical Expense FRA Dependent Care FRA
An eligible employee can contribute to the
Medical Expense Flexible Reimbursement Account,
the Dependent Care Flexible Reimbursement Account
or both.
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Both accounts offer you convenience

• FRA contributions are automatically deducted
  pre-tax and credited to the account(s).
• Medical Expense FRA funds are available at the
  beginning of the plan year.
• Dependent Care FRA requires funds to be in the
  account before it is available for use.

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Both accounts require careful planning

• Estimate expenses for the plan year carefully
• Submit claims within 3 months of the plan years
  end
• Forfeiture Rule Use it or Lose It Any money
  left in these accounts at the end of the plan
  year cannot be refunded or rolled into the next
  plan year.

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Heres How It Works

• WITHOUT FRA WITH FRA
• 1500.00 Gross Pay 1500.00
• 0.00 FRA Reductions -235.00
• 1500.00 Taxable Gross Pay 1265.00
• -340.00 Taxes and SS (22.65) -287.00
• -235.00 Eligible Expenses
  000.00
• 925.00 Spendable Income 978.00
• Tax Savings with FRA 53

Figure assumes a 12 month plan year, 15 federal
withholding and 7.65 Social Security. Individual
tax rates may vary.
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How Flexible Spending Accounts Work

• Determine a pre-tax deduction amount per pay
  period by completing the FRA worksheet available
  in the Flexible Benefits Sourcebook.
• Enroll online at http//edirect.state.va.us or
  contact your agencys Benefits Administrator
• Deductions are placed in account (s) each pay
  period

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How Flexible Reimbursement Accounts Work

• Employee incurs eligible expense
• Employee submits reimbursement form with receipts
  and documentation to FBMC
• FBMC receives reimbursement form, receipts and
  documentation
• FBMC produces check using the tax free money from
  the FRA

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How Flexible Reimbursement Accounts Work

• Payment is issued within 5 business days of
  receipt of a completed reimbursement request form
  (does not include mail time)
• Reimbursement is deposited directly into bank
  account if employee elects direct deposit
• Direct deposit forms are available for
  participants on the FBMC web site
• For more information, visit the DHRM Web site at
  www.dhrm.state.va.us

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Medical Reimbursement Account

• Pays deductibles, co-payments, prescriptions,
  tax-free, for eligible employees and dependents
• Pays expenses not covered under insurance, i.e.
  eyeglasses orthodontia
• Save from the first dollar of out-of-pocket
  eligible expenses

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Medical Reimbursement Account
Eligible Dependents For Medical Expense FRA

• Spouse
• Relative receiving more than half of
  participants support for calendar year
• Member of the participants household, who
  receives half their support from participant

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Medical Reimbursement Account
Eligible Expenses For Medical Reimbursement
Account

• Reimbursed for most health care items not paid by
  an insurance plan
• Medical expenses cannot be claimed on your tax
  return unless they exceed 7.5 of your adjusted
  gross income
• If health care expenses are claimed as income tax
  deductions, they cannot be reimbursed through a
  Medical Expense FRA

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Medical Reimbursement Account
Examples of Eligible Medical Expenses Approved
by the IRS

• acupuncture
• fees for physicians, surgeons, dentists,
  ophthalmologists, optometrists, chiropractors
• plan deductibles co-payments
• orthodontic expenses

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Medical Reimbursement Account

• Examples of Eligible Medical Expenses
• Approved by the IRS
• Smoking cessation programs/treatments
• most prescription medicines, drugs and insulin
• wheelchairs, automotive controls equipment for
  the deaf

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Medical Reimbursement Account

• Examples of Eligible Medical Expenses
• Approved by the IRS
• hospital services, physical therapy, massage
  therapy, chiropractic services, laboratory,
  obstetrical, diagnostic, X-ray services
• dentures, artificial limbs, contact lenses,
  eyeglasses, hearing aids, crutches guide dogs
• Mileage, tolls and parking for medical visits
• Certain Over-the-counter drugs antacids, pain
  relievers,cold medications and allergy
  medications

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Medical Reimbursement Account
Examples of Non-Eligible Expenses

• expenses incurred before date of participation
• elective cosmetic surgery not deemed medically
  necessary
• marriage or family counseling fees
• domestic help, even if recommended by a doctor

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Medical Reimbursement Account

• Examples of Non-Eligible Expenses
• funeral and burial expenses
• illegal operations or treatments
• vitamins or food supplements taken for general
  health purposes
• health care insurance premiums
• hair transplant or removal
• health club or gym membership dues

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Dependent Care Reimbursement Account

• Set aside tax-free money for dependent care
  expenses that allow you and your spouse to work,
  look for work or attend school full-time.
• Dependent care expenses reimbursed from your
  tax-free account cannot be claimed on your
  federal income tax return.

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Dependent Reimbursement Account
Eligible Dependents For Dependent Care FRA

• Children age 12 or younger who reside in
  household
• Adults/children incapable of self-care

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Dependent Care Reimbursement Account
Examples of Non-Eligible Expenses

• child support payments
• books and supplies
• overnight care for dependents
• activity fees
• diaper service
• nursing home fees
• kindergarten expenses
• educational tuition

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Important Rules to Know
Availability Rule for Medical Reimbursement
Account Funds are available regardless of
whether all contributions have been made on the
first day of the plan year!
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Important Rules to Know

• Be conservative
• when determining an annual election amount for
  your
• Flexible Reimbursement
• Account.

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Important Rules to Know

• Forfeiture Rule
• Any funds remaining in a Flexible Reimbursement
  Account at the end of the plan year cannot be
  returned!
• (Use-it-or-Lose-it Rule)

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Important Rules to Know

• Medical Expense Reimbursement Accounts
• Eligibility Requirements
• All employees who have been eligible to
  participate
• in the State Health Benefits Program for six
• (6) continuous months may participate.
• (Note You do not have to be enrolled in a
  health plan)

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Important Rules to Know

• Medical Expense Reimbursement Accounts
• Eligibility Requirements
• New employees wishing to participate
• must enroll within the 31 days prior to
• completing six (6) months of eligibility
• for the State Health Benefits Program.

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Important Rules to Know

• Medical Expense Reimbursement Accounts
• Eligibility Requirements
• If an employee does not enroll during their
• election period, they must wait until the next
• plan year or until they experience an event
• that permits a mid-year election change.

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Important Rules to Know

• Dependent Care Reimbursement Account
• Eligibility Requirements
• All employees who are eligible to participate in
  the State Health Benefits Program may participate
  in the Dependent Care FRA Plan.

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Important Rules to Know

• Dependent Care Reimbursement Account
• Eligibility Requirements
• The initial election period is within 31 days
• following the date of eligible employment. If an
  employee does not enroll during their election
  period, they must wait until the next plan year
  or until they experience an event that permits a
  mid-year plan election change.

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Important Rules to Know

• Funds cannot be transferred between Medical and
  Dependent Care Flexible Reimbursement Accounts.
• All expenses must be incurred during the plan
  year (or your period of coverage).

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Termination

• You may continue Medical Reimbursement Account
  coverage by electing Extended Coverage.
• Information regarding Extended Coverage for
  Health Benefits, including the Medical
  Reimbursement Account, can be found on the DHRM
  Web site or with your agencys Benefits Office.

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Unpaid Leave

• You may continue Medical Reimbursement Account
  coverage by making arrangements to pay on a
  pre-tax basis prior to the leave or paying
  out-of-pocket while on leave.
• If you choose not to continue participation, the
  account will cease at the end of the month
  (providing the full months deduction is
  received).

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Change in Status

• FRA elections may be changed
• only when a qualifying mid-year
• event has occurred.

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Change in Status

• Any election changes must be on account of and
  correspond with your Change in Status Event.
• Your Benefits Administrator will review election
  change requests and approve if the request meets
  IRS Regulations governing a Change In Status.

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Changes In Status Qualifying Events

• Marriage or Divorce
• Death of a spouse or dependent
• Birth or Adoption
• Ineligibility of dependent (due to age, marriage,
  or loss of student status)
• Termination or Commencement of spouses
  employment
• Switching from full-time to part-time
• Beginning or ending an unpaid leave
• Change independent care cost or provider

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Advantages of an FRA

• FRAs offer valuable savings.
• Why pay more in taxes for expenses that would be
  reimbursable through a Flexible Reimbursement
  Account?
• Do you need tax deductions?

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Advantages of an FRA

• Some expenses can be
• accurately predicted,
• therefore risk of forfeiting
• funds is minimal.
• For example
• Maintenance prescriptions
• Contact Lenses
• Day-care center charges
• are easily estimated.

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Enrollment Information

• There will be two enrollments within the next
  year for Flexible Reimbursement Accounts.
• There will be a short plan year from January 1,
  2004 through June 30, 2004.
• There will be a regular 12 month plan year
  beginning July 1, 2004 through June 30, 2005.
  This will put the reimbursement accounts and the
  health plan on the same plan year.

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Important Dates to Remember

• Short Plan Year
• Open Enrollment Dates Are
• 10/20/03 11/21/03
• Plan year is
• 01/01/04 06/30/04

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Important Dates to Remember

• Grace period dates for the short plan year are
• July 1, 2004
• Through
• September 30, 2004

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Important Dates to Remember

• All requests for reimbursement of expenses
  incurred within the plan year
• (01/01/04 through 06/30/04) must be
• received at FBMC before September 30, 2004.

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Enrollment Information

• Short Plan Year Minimums and Maximums for
  medical and dependent care accounts will be
  10.00 per pay period not to exceed a plan year
  total amount of 2,500.
• Additional limits apply to Dependent Care based
  on the tax filing status.

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Important Enrollment Information

• All enrollment elections must be processed
  through EmployeeDirect or received by the
  agencys benefits office by
• November 21, 2003

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Important Enrollment Information

• Enrollment

EmployeeDirect
http//edirect.state.va.us/ Use the
Commonwealths health benefits enrollment during
the designated period.
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Enrollment

• You must re-enroll annually to continue
  participation in a Medical Reimbursement or
  Dependent Care Reimbursement Account.
• Participation in Premium Conversion will continue
  automatically.

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Questions?

• Fringe Benefits Management Co.1-800-342-8017
• Monday-Friday 7 a.m. -10 p.m. Eastern
• E-mail
• webcustomerservice_at_fbmc-benefits.com
• Web Site
• http//www.fbmc-benefits.com

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Information is also available on the DHRM Web
site at www.dhrm.state.va.us

• Enrollment through EmployeeDirect
• http//edirect.state.va.us/

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This presentation was brought to you by Fringe
Benefits Management Company