TAX FAVORED CARE ACCOUNTS Flexible Spending Accounts (IRS Sec. 125)
- May be funded by both Employer and Employee (Employee funds used first.)
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Employee has immediate access to full amount of annual contribution amount, even though he/she funds by payroll deduction.
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All account balances that are not utilized during the plan year revert to the employer.
Health Care Reimbursement Arrangements
- Funded solely by the employe
- Funding can be done in a variety of ways. (Such as $250 per quarter for a $1,000 annual amount.)
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Employees can only access amounts that have actually been allocated to their accounts.
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The employer may select how the accounts are replenished and whether or not the funds would be available to the employee after termination of employment.
Health Savings Accounts
- Requires a qualified high deductible health insurance plan (as determined by Federal regulation).
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May be funded by both Employer and Employee.
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Funds are deposited on a tax exempt basis, may earn tax free interest, and are tax exempt when spent for qualified health care expenses per IRS code section 213(d). (Similar to an IRA account.)
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Employees can only access amounts that have actually been deposited into the account.
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