Establishing a flexible spending account with your benefits administration could save you money in the long run.
Flexible spending accounts are an important part of many benefits administrations. This aspect of the benefits program makes it possible to fund health care expenses that aren’t covered in health plans using pretax dollars. Essentially, it’s a discount on any out-of-pocket expense that allows employees to pay with pre-tax money. Although there are additional administrative responsibilities involved with managing a flexible spending account, it could be worthwhile to your business.
1. Flexible spending accounts in a business’s benefits administration help retain employees.
It’s an appealing feature because it gives employees a discount equivalent to the taxes they would otherwise pay on these medical expenses, which can amount to some impressive savings. This FSA coverage includes doctor and dentist co-pays and prescriptions.
2. Reduce taxes and get more for the money you spend.
Out of pocket health care and dependent care expenses are otherwise paid with after-tax dollars, which increases the cost by between 20 – 40 percent. You are making the money go further with an FSA.
3. Reduce overall expenses.
Social security, Medicare, and tax liabilities will all be affected by the decision to incorporate a flexible spending account. Especially with regard to payroll taxes, businesses will reduce their expenses and allow employees to take more money home per paycheck.
Although the flexible spending account benefit must be maintained on an annual basis, many businesses find that it improves the quality of their benefits administration. For more information, download our free whitepaper on PEO.