Healthcare Benefits that Will Benefit Prevailing Wage Workers
A health flexible spending account, also known as a flexible spending arrangement or an FSA, is a pre-tax account that is used to pay for certain out-of-pocket health care costs for a beneficiary or participant, as well as the beneficiary’s spouse and eligible dependents.
A health flexible spending account is an employer-established benefit plan that may be offered with other employee benefits. An FSA is funded through voluntary salary deduction agreement between you and your prevailing wage employee. You, the employer may also contribute to your employees’ FSA, though you are not required.
What are the Benefits of an FSA?
Your prevailing wage workers will enjoy the following benefits by having an FSA as part of their healthcare benefits.
- Contributions made by the employer is excluded from the income of the employee.
- No federal taxes are deducted from the contributions made to an FSA.
- Withdrawals for qualified medical expenses are tax free.
- A beneficiary can withdraw from an FSA for a qualified medical expense even if no funds are placed yet in the account.
Who are eligible for a Flexible Spending Account?
You should design your own health FSA so that it is only eligible to your prevailing wage employees participating in your major medical and healthcare plan. It must qualify as an excepted benefit; otherwise, you will pay an excise tax of $100 per participant per day, or other applicable penalties.
At the beginning of the plan year, the contribution amount must be decided by the employee. The contribution amount must not be greater than $2,500 per year.
Where can FSA Funds Be Used?
The FSA fund can be used to pay for the following:
- Qualified medical and dental expenses of the participant, the married participant’s spouse, and the participant’s qualified dependents.
- Prescription medications and over-the-counter medicines with doctor’s prescription.
- Medical equipment such as crutches, bandages, and diagnostic tools such as sugar test kits.
The beneficiary will receive the maximum amount of reimbursement during the coverage period. This maximum amount is the total amount agreed to be contributed to the FSA of your prevailing wage employee for that year.
What Happens to Unused FSA balances?
An FSA is basically a “use-it-or-lose-it” plan, and the unused balances in the account are generally forfeited. The plan however, does offer a grace period or a carryover of the remaining balance.
A grace period of 2 1/2 months after the end of the plan year is given, and any qualified medical expenses incurred can be paid from the balance of the previous plan year.
A carryover of up to $500 of unused FSA balance can be accrued to the following plan year. Any excess of the maximum amount are forfeited.
A plan can either offer a grace period or a carryover, but not both.
For more information on how a Flexible Spending Account can benefit you and your hourly workers, contact ARCHER JORDAN.
If you want to include a flexible spending account as part of your prevailing wage workers’ employment benefits, ARCHER JORDAN’s benefits specialists are here to help you.
ARCHER JORDAN is a third party benefits administrator and we specialize in fringe benefit plans. Let us help you provide the best benefits for your employees, while helping you save thousands of dollars and comply with federal prevailing wage requirements.