02-05-2002 - Award of Bid - Section 125 Plan Third Party Administrator ContractTO:
FROM:
SUBJECT:
SUMMARY:
Andrew G. Pasmant, City Manager
and City Council
Artie A. Fields, Assistant City Manager
City of West Covina
Memorandum
AGENDA
ITEM NO. C — 6c
DATE February 5, 2002
AWARD OF BID — SECTION 125 PLAN THIRD PARTY
ADMINISTRATOR CONTRACT
This contract is for professional services, to be provided by a Third Party
Administrator (TPA), for the City of West Covina's Section 125 Plan (Flexible
Benefits Spending Plan).
BACKGROUND:
The Memorandum of Understanding (MOU) for the General, Maintenance, Public Safety
Dispatchers, Mid -Management and Confidential/Exempt Employee Associations, require that the
City of West Covina establish a Section 125 Plan (See Attachment A).
The Firefighter, Police Officer and Police Management Associations do not have any
requirement of a Section 125 Plan in their MOU's. _However, the Section 125 Plan will be
available to them.
In 1978 the Internal Revenue Service (IRS) implemented the IRS Code Section 125, which
authorized employers to create flexible spending accounts for employees. Section 125 allows
employees to defer pre-tax dollars from their salary into flexible spending accounts to pay for
medical/dental/vision care and/or dependent care expenses. Thus, reducing an employee's
taxable income. In the late 1980's, Section 125 grew in popularity with employees and
employers as deductible expenses expanded and greater flexibility was provided Ito reduce
employees' taxable income.
The categories for the Section 125 Plan are as follows:
Medical/Dental/Vision Flexible Spending Account - Allows money to be set aside, on a
pre-tax basis, to pay for "out of pocket" medical, dental, and ,vision expenses. This
includes deductibles, co -payments, and other such expenses incurred by the employees,
their spouse and their dependents. The maximum expense for this category is $2500.
Dependent Care Flexible Spending Account - Allows money to be set aside,, on a pre-
tax basis, so that the employee, or the employee and their spouse, may work ',,in lieu of
staying home to care for a dependent. This includes childcare, up to age 13, and adults or
older children with handicaps. Tuition for school age children is not an eligible expense,
but before and after school care and day care is eligible for a maximum of $5,000 per year.
IRS law allows an employee to designate how much money is deferred over the year for
medical/dental expenses. At the end of the year, any funds remaining in the account are returned
to the City. Therefore, it is the responsibility of the employee to budget their anticipated
expenses at their own risk. Cities do not have the option of returning the funds to the employee.
The City also takes on the risk that an employee may use all of their designated benefit at the
beginning of the year, before making all necessary deductions, making the City liable to cover the
expenses until the employee fully repays the account. However, if an employee leaves the
service of the City, the City would be liable to pay the fees and is not allowed to collect from the
employee to reimburse these costs. After consulting with the various firms, this'!' is a rare
situation and the unused funds at the end of the year, typically cover these unanticipated costs.
This benefit is being made available to full-time permanent employees only, because Limited
Service employees salaries are typically not sufficient to gain any benefit from a reduction in
taxable income and Limited Service employees are more likely to terminate their employment
with the City more frequently, placing a greater potential for liability of un-reimbursable claims
on the City.
DISCUSSION:
Staff mailed a Request for Proposals (RFP) to 17 firms, soliciting the administration of the City
of West Covina's first ever Section 125 Plan. Six proposals were received by the November 16,
2001 deadline and opened on that date. The proposal from Ameriflex was denied for failing to
complete plan cost information as required in the RFP.
Staff reviewed the remaining proposals for completeness of content and compared them to one
another based on cost to implement and manage the Section 125 Plan. The top three firms were
invited to an interview, where the proposals were compared to one another, based on cost,
experience with municipal agencies, time needed to reimburse employee claims, and structure of
administering the plan. During the interview process, AFLAC was disqualified for requiring the
City to advertise supplemental insurance.
To compare the proposals equally, several assumptions were made to estimate the costs of
implementing the Section 125 Plan:
1. Employee participation was 25% or 100 out of 400 employees (Typically plans average
around 20%).
2. Firm to conduct eight enrollment meetings over four days to insure that all employees are
given the opportunity to participate.
3. All employees sign-up for direct deposit and both medical/dental/vision and dependent
care accounts.
4. Length of contract is from March 1, 2002 to December 31, 2002.
The following is a summary of the quotes presented by the firms that submitted a proposal.
Fu-m s`
Cost to Administer
Cost to Administer
'
Section 125,P1an
Section 125 Plan
FollowI Years . .:.
AFLAC
$ 5,450
$ 5,450
Thrasher & Associates lexPro
$ 7,250
$ 6,875
Barney & Barney
$ 7,350
$ 6,600
ProBusiness
$ 9,980
$ 8,868
EBS
$10,325
$ 8,800
Ameriflex
Disqualified*
Disqualified*
* Did not provide cost information for City staff to determine plan total cost.
This item was held -over from the January 22, 2002 City Council meeting due to a last minute
concern raised by Thrasher & Associates. Thrasher & Associates pointed out to staff that his bid
included a waiver of certain fees, which were not reflected on the cost sheet that all bidders had
to complete in order for City staff to properly conduct a cost comparison. Since Thrasher &
Associates had submitted these reduced costs prior to the closing of the bid process, City staff
reduced Thrasher & Associates cost sheet the appropriate amount.
After adjusting for Thrasher & Associates cost reduction, City staff determined that it would
maintain its original position to recommend Barney & Barney for the following reasons:
1. With the amended proposal submitted by Thrasher & Associates, the first year costs to
provide the Section 125 are $100 less than the next qualified bidder, Barney & Barney,
for the first year. Each subsequent year, Thrasher & Associates is $275 greater than the
next qualified bidder, Barney & Barney. Thus, any savings during the first year will be
eliminated in the following years.
2. Thrasher & Associates is not actually administering the Section 125 Plan. Another
company, Flexpro is providing the Section 125 Plan through Thrasher & Associates.
City staff is concerned that this may reduce efficiency in providing prompt
reimbursement to employee claims and responding to employee questions.
3. City staff contact Flexpro's references and received miffed comments. No Preferences
were submitted to illustrate Thrasher & Associates experience in administering a Section
125 Plan.
City staff selected Barney & Barney to administer the Section 125 Plan because of their low cost,
efficient turn around time for employee claims and experience with municipal',I agencies.
Attachment B includes information on Barney & Barney and general information on1 a Section
125 Plan.
City staff contacted three of Barney & Barney's references, including the Cityt of West
Hollywood and City of Vista. The references all had positive experiences with Barney] & Barney
and were impressed with Barney & Barney's excellent service, accessibility, prompt responses,
professional service and the increase in employee participation over other !' previous
administrators.
In order to insure that all RFP's were evaluated using a consistent criteria, the City requested that
firms submit "supplemental services" on a separate report. Although, AFLAC presented the
information separately, AFLAC later informed City staff that they would not honor their numbers
because they were not interested in administering the Section 125 Plan without being able to sell
supplemental insurance. This action disqualified AFLAC from further consideration and the City
contacted the second lowest bidder.
The costs provided by Barney & Barney are summarized below.
• Setting up City Section 125 Plan Document .................................................$ 750
• Group Enrollment Meetings (Assuming eight meetings) ................................ 600
• Monthly Participation Fee at $6/employee (Assuming 100 employees participate*)..''.. 6,000
• Total Cost for Section 125 Plan ............................................................. $7,350
* For remainder of the Calendar Year.
If a Section 125 Plan is implemented, IRS law requires that all employees, not just those
participating in the Section 125 Plan, be given the option to cash out their excess medical benefit.
Currently, the City deposits any excess medical benefit into an employees deferred
compensation account. According to CALPERS, this excess medical benefit is not a reportable
compensation to PERS. Providing the cash out option will require an amendment to all
bargaining units' MOUs.
The Section 125 Plan contract with Barney & Barney is to take affect on March 1,,'2002 and
conclude on December 31, 2002, with the option to renew each subsequent year from January 1
to December 31, at the City's discretion.
Most of the cities in the San Gabriel Valley offer a Section 125 Plan to their employees. As a
result, implementing a Section 125 Plan will make the City of West Covina more competitive in
recruiting new employees.
FISCAL IMPACT:
Awarding the contract to Barney & Barney will cost the City approximately $7,350 (Assuming
100 employees participate in the Section 125 Plan for the remainder of the Calendar, Year). In
order to implement this program, it is necessary that the City Council transfer $7,356 from the
General Fund Reserve into account 110-320-2550-5164.
Providing the cash out option to employees' deferred compensation will generate an additional
Medicare costs to the City. The City is required to pay 1.45% of an employee's salary towards
Medicare. With the cash out option, the City will be required to pay 1.45% on the employee's
salary and 1.45% on any excess medical premium that is cashed out. If all employee's cash out
their excess medical benefit, the Medicare cost for the current fiscal year would be $4,908
(Assuming all eligible employees cash out). It is anticipated that each department will be able to
absorb this expense in their current budget. Should a department be unable to do so, staff will
prepare a quarterly budget adjustment request for the City Council's consideration.
RECOMMENDATION•
i
It is recommended that the' City Council take the following actions:
1. Accept the proposal of Barney & Barney as submitted on November 16, 2001;
2. Authorize the Mayor and City Clerk to execute an agreement with Barney & Barney to
provide Section 125 Plan Third Party Administration effective March 1, 2002;
3. Authorize the City Manager to execute an amendment with the various bargaining units'
MOUs to allow cash out option on excess medical benefit; and
4. Appropriate $7,350 from the General Fund Reserve to account 110-320-2550-5164
(Section 125 Administration) to administer the Section 125 Plan.
Prepared by:
61ee�V
Chris Freeland
Administrative Analyst II
Reviewed & approved by:
Artie A. Fields&
Acting Finance
Attachments
Assistant City Manager
ATTACNT
HME
• DATE — -S - 02-
MEMORANDUM OF UNDERSTANDING {,I
Between
R es of
e resentativ
P
Management for the City of West Covina j
and
San Bernardino Public Employee's Association
West Covina Maintenance Employees
July 1, 2000 through..June 30, 2003
SECTION 3. MEDICAL AND DENTAL INSURANCE BENEFITS
The City shall provide W2 per month to offset the employee cost of health insurance. Effective
January 2001, the City shall provide $516 per month to offset the employee cost of health insurance.
Effective January 2002, the City shall provide S536 per month to offset the employee cost of health
insurance. Effective January 2003, the City shall provide $556 per month to offset the employee cost of
health insurance. The amount specified for PERS Health Care Plan coverage shall be $16 per month per
active employee. City shall provide up to $20 per month to offset the cost of dental insurance.
Section 125 Plan • The City shall establish a program, consistent with Section I,125 of the IRS
Code, which will enable employees to voluntarily use pre-tax earnings for medical, dental; and dependent
care expenses. A labor management committee will be established with City representation and
representatives from all interested bargaining units to assist with the implementation and inform
employees. It is understood by the parties that participation in the plan is voluntary for employees and the
City will not be obligated to contribute to this plan once it is implemented by the City.
ATTACHMENT.
DATE — .2 —S — b A
BAMEY
B.BLYL L C
Insurance Since 009 An ASSUREX Partner
Wjork/ I n,gj uln
P��11J�1�li'iJIJ jj� 1�1��.1�11J
City Manager's Office
Your New Section .125 Plait Administrator for
The City of West Covina
Proposed Effective Date: 03/01/02
Annie Christian Strenk
Flexible Benefits Consultant
Barney & Barney, LLC
9171 Towne Centre Drive, Suite 200
(858) 587-7519
Visit ()I"- website at
CITY OF WEST COVINA
PROPOSAL FOR SECTION 125 PLADMINISTRATIVE SERVICES
City Manager's Office
Why Choose Barney & Barney?
f
92 Years of
Insurance Experience
in San Diego and Globally
Over 150 Insurance
Professionals
5 Major Departments
Property & Casualty
Employee Benefits
Surety Bonds
Personal Lines
Professional Liability
Privately owned since 1909
Top 40 Nationally
Combined with our
Assurex Affiliation,
Ranked 3`d in. the Nation
Full Claims Department
Claims Dispute Resolution
Workers' Compensation Claims Analysis
What makes us stand out?
Quality
Award Winning Brokerage
• San Diego Better Business Bureau
"Marketplace Integrity" Torch Award
• Governor's Award
• San Diego Business Integrity Award
• Employer of the Year Award it
• IIAA Best Practices Award
• California Agency of the Year
• National Assurex Award for Highest Quality
• Seven Times Winner PAR Excellence Award
Integrity
Innovative Thinking
Creative Marketing
Professional Service
Community Commitment
Here to serve any of your insurance needs
0-ZP0\City of West C&AMX125.doc 1
' CITY OF WEST COVINA
• PROPOSAL FOR SECTION 125 PMINISTRATIVE SERVICES
City Managcr's Officc
Firm Name: Barney and Barney, LLC
Address: 9171 Towne Centre Drive, Suite 200
.San Diego, CA. 92122
Telephone: 1-800-321-4696
Contact: Annie Christian Strenk
Flexible Benefits Consultant
Barney and Barney
9171 Towne Centre Drive, #200
San Diego, CA. 92122
(858) 587-7519
email: annies@bameyandbamey.com
The following is a Biographical Summary of our Flexible Benefits Team who would be
assigned to work on the City of West Covina Section 125 Plan
ANNIE STRENK, FLEXIBLE BENEFITS CONSULTANT
Annie Strenk has worked in the health care field for 25 years, specializing in
group health sales and Section 125 consulting. She has served the San
Diego employee benefits marketplace for over 15 years, and has been
responsible for Section 125 plan consulting and plan implementation for.both
the public and private sector.
Mrs. Strenk is a member of the Employer's Council of Flexible Compensation,
and is currently studying for her Certification in Flexible Compensation.
CRIS LOVINS, CFC, FLEXIBLE BENEFITS ACCOUNT MANAGER
(EC
Cris Lovins manages the administration of the Flexible Benefits Plan for all of
our clients. Ms. Lovins is a graduate of San Diego State University, and has
been with Barney & Barney since September, 1987. In addition to her
administrative duties, she oversees the technical aspects of flexible benefits
plan issues such as COBRA applications and non-discrimination testing. Ms.
Lovins maintains all the flexible spending account records, along with assisting
Ms. Strenk in implementation and communication of flexible benefits plans to
new and existing clients. Ms. Lovins has received the designation of Certified
in Flexible Compensation through the Employer's Council on Flexible
FC).
Q:\SPD\City of West Covina\125.doe
CITY OF WEST COVINA
PROPOSAL FOR SECTION 125 PLASADMINISTRATIVE SERVICES
F
City Manager's office
ERIC OPENSHAW, FLEXIBLE BENEFITS ADMINISTRATOR
Eric Openshaw joined Barney & Barney, LLC in 1998. He has been in the
insurance field for 16 years and previously spent ten years at First Health
Strategies, a Third -Party Administer. During his time with First Health
Strategies, he was responsible for many system audits. He has also worked
as a claim processor, systems analyst, systems developer and Claims Audit
Supervisor.
Q SP=ity of West Covina1125.doc
• FLEXIBIEJENEFITS PLAN INFORMATIVJ PACKET
Pt FdSF RFd1) CA RER 11 L V
If you have any questions concerning your employer sponsored plan, please contact the flexible
Benefits Department at Barney & Barney, (858) 587-7516, 4 i
V`� (858) 587-7584, (858) 587-4033 ore -mail address: Flex Benefits@bameyandbamey com.
Visit us at our Website: bameyandbameycom/fsa
J
�i Toll Free Number. 1-800-321-4696
elf
This overview is designed in a question and answer format for greater comprehension.
\ #7
A. What is the Flexible Benefits Plan? C. How Do I Enroll? 1
A Flexible Benefits Plan offers a unique way to help
you increase your net income. With this Plan, you can
contribute your portion of the premium of an employer
sponsored health insurance plan on a pre-tax basis.
This is called premium conversion. In addition, you
can put part of your pay into special accounts (Flexible
Spending Accounts) to pay some of your health care
and dependent care expenses not covered by other
benefit plans. Depending on your tax bracket, you
could be paying an extra 25% to 35% in Federal, State
and FICA taxes on these expenses. If you participate
in the Flexible Benefits Plan, you will save taxes on
these expenses, therefore, increasing your spendable
income. The amount that you redirect through the
Flexible Benefits plan options is not taxed for Federal,
State or FICA (Social Security) purposes.
B. What Types of Flexible Spending
Accounts are Available?
Two types of accounts are available: Health Care and
Dependent Care. Money you redirect to your Health
Care Flexible Spending Account may be used to pay
expenses not currently reimbursed by your group
health plan, such as copayments, deductibles, co-
insurance, dental services, vision care, etc. A
Dependent Care (child care) Flexible Spending
Account is used for expenses incurred to enable you
and/or your spouse to work. These expenses may be
for child care or other qualified dependent care. The
annual maximum amount you may redirect to your
Dependent Care (child care) Flexible Spending
Account is $5,000 ($2,500 if married filing separately).
The annual maximum you may redirect to your Health
Care Flexible Spending Account is specified by your
employer.
Eligible expenses are for these services received by
you and qualifying dependents, even if not covered
under the employer sponsored group health plan.
You may participate in both accounts or you may
choose to participate only in one account or you may
decline to participate.
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Flexible Benefit Plan participation is on a year-to-year
basis. An annual open enrollment will be held, so you
will have the opportunity to participate each year. If
you are a plan participant and wish to continue, you
must re -enroll each year. You do not have to
participate in the Health Care Flexible Spending
Account or the Dependent Care Flexible Spending
Account to take advantage of the premium conversion
portion of a Flexible Benefits Plan.
D. When Can I Change the Amount I am
Contributing to a Flexible Benefits Plan?
Your Flexible Benefits Plan contribution can be
changed only during the annual open enrollment
unless you have a change in family status during the
year. If this occurs, you may change your election. A
change in family status includes, but is not limited to,
marriage or divorce, birth or adoption, death,
commencement or termination of your spouse's
employment. Please review allowable charges
provided in the Barney & Barney website. A
participant may increase, decrease, cease or start up
due to a family status change. When a family status
change has occurred, changes will be allowed up to
30 days after the change in family status or when -you
return to work from a leave. The new election will
become effective the day the Change Form is signed
and completed on or after the date of a Family Status
Change. Please review the Summary Plan
Description to see if any limitations are set on
changes to the Health Care Flexible Spending
Account.
During the open enrollment, you may increase,
decrease, or stop your participation for the coming
year.
E. What Happens If I Don't Use All the
Money 1 Set Aside?
Careful calculation of the amounts you want to redirect
to each spending account is very important. Any
money remaining in your account at the end of the
year is forfeited back to your employer. This rule is a
Internal Revenue Service "use it or lose it" regulation.
F. How Do I Get Reimbursed for My
Expenses?
Once you have incurred a health and/or dependent
care expense, you must submit a claim for
reimbursement to Barney & Barney, Contract
Administrator. You must complete a Request for
Reimbursement Form and attach an itemized
statement from the provider of service. Claims will be
processed according to the reimbursement schedule.
Dependentrare: A billing statement or receipt from
the provider must accompany the Request for
Reimbursement Form. The statement or receipt must
specify the dates of service, the name of the
dependent(s) receiving the care, the dollar amount of
the charges and the type of service (i.e., childcare).
Health Care: A billing statement from the provider of
service or an Explanation of Benefits from your group
health insurance carrier must accompany a Request
for Reimbursement. The.statement must specify the
name of the provider of service, the type of service,
the date of service, the recipient of service and the
dollar amount of the charges. Prescription drug
claims can be substantiated with the pharmacy receipt
"label" that outlines the date, name of recipient, type of
drug dispensed and the dollar amount of the drug.
Be sure to visit our website or call Barney & Barney for
any questions concerning substantiation of claims.
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G. What Imp& Does Redirected Salary
Have on cial Security Taxes and
Benefits?
If you participate in the Social Security system, and
earn less than the Social Security wage base (indexed
each year, you will save taxes on the amount
redirected to your accounts. However, any future
benefits you might receive from Social Security may
be slightly less. To determine the specific impact on
your Social Security benefits, you should contact your
tax preparer or advisor.
H. Does the Dependent Care (Child Care)
Flexible Spending Account Impact the
Child Care Credit?
Any expenses reimbursed with pre-tax dollars cannot
be applied to the tax credit on your income tax return.
Generally, if your joint annual income exceeds
$24,000, the Dependent Care (child care) Flexible
Spending Account could be more beneficial to you.
Each situation needs to be evaluated individually.
Please contact your tax advisor or Barney & Barney
for more specific information regarding the child care
credit.
1. Is There Special Documentation
Required for Reimbursement of
Orthodontia Treatment?
The IRS requires that specific documentation be
furnished when requesting reimbursement for
orthodontia treatment. Since most orthodontia
programs extend for long periods of time, sometimes
beyond the Plan Year, we ask that the Orthodontist
provide a document or a copy of the contract listing
services and the cost of care for the employer
sponsored Flexible Benefits Plan Year. Only those
services incurred during the Plan Year are eligible for
reimbursement (not beyond the Plan Year). Once you
have fumished us with a copy of the contract or
statement from the Orthodontist listing the type of
treatment duration of treatment and payment
schedule, you will need to submit a copy of the
monthly payment receipt as incurred from the
Orthodontist along with a completed Request for
Reimbursement Form. (IF YOU PAY THE
ORTHODONTIST UP FRONT FOR THE ENTIRE
TREATMENT, REIMBURSEMENT WOULD ONLY
BE LIMITED TO THE COST OF TREATMENT FOR
EACH MONTH IN THE PLAN YEAR AS INCURRED.
REIMBURSEMENT CANNOT BE MADE ON
PREPAID SERVICES. Please contact Barney &
Barney for details on reimbursement for orthodontia).
ELIGIME HEALTH CARE EXPENSE&FOR
PRESCRIPTION DR 1 .R
Prescription drugs, insulin
Birth control drugs (prescribed)
mFnICAL FQ111PMFNT
% Wheelchair or autoette (operating/maintaining)
Crutches (purchased or rented)
Special mattress & plywood boards prescribed to
alleviate arthritis (amount over cost of ordinary mattress)
Oxygen equipment & oxygen used to relieve breathing
problems
Artificial limbs
% Support hose (medically necessary)
Wigs (for mental health of individual who loses hair
because of disease)
Excess cost of orthopedic shoes over cost of ordinary
shoes
FFES/SERVI . S
Physician's, Anesthesiologist's, Dermatologist's, &
Gynecologist's fees
Obstetrical, Hospital, Surgical & Diagnostic services
Nursing services for care of a specific medical ailment
Where the nurse's services qualify: cost of nurse's
room/board if paid by the employee and the Social
Security tax paid with respect to wages
v Services for chiropractors and osteopaths
Christian Science practitioner fees
PSYCHIATRI
Services of psychotherapists, psychiatrists and
psychologists
Psychiatric therapy for sexual problems
% Long distance calls for psychiatric counseling conducted
over the phone
Legal fees directly related to mental commitment of
mentally ill person
DENTAL & ORTHODONTI _ cAgF
Dental Care
Artificial teeth/dentures
Cost of fluoridation of home water supply advised by
dentist
% Braces & orthodontic devices (contact Barney & Barney
for details of specific documentation required)
PHYSICALS
D Routine & preventive physicals
School & work physicals
T_ HERAPY TREATM NTS
% X-Ray treatments
Treatment for alcoholism or drug dependency
Legal sterilization, abortion and vasectomy
Acupuncture
'v Chiropractor's fees
Vaccinations
Physical therapy (medical treatment)
Fee to use swimming pool for exercises prescribed by
a physician to alleviate specific medical condition
% Speech therapy
% Massage therapy if medically necessary doctor's (or
chiropractor's) statement of medical necessity to treat
a specified medical condition. Statement must also
include duration of time of treatment
HEARIN , ExPFNS R
:- Hearing aids
% Batteries for operation of hearing aids
_VISION CA
v Optometrist's or opthamologist's fees
Prescription eyeglasses
Contact lens & solution
%= Radial Kerotonomy
Laser Eye Surgery
ASSISTAN _F FOR THE -HANDICAPPED
Guide for blind person
Note -taker for a deaf child in school
% Braille books & magazines in excess of cost of regular
editions
MISCFI I AN O IS CHAR , S
X-Ray
Donating an organ
Computer storage of medical records
Child birth preparation classes, except for portion for
feeding and newborn care
Cost of physician services for weight loss, if medically
necessary to remedy a condition other than general
well being.
Stop smoking programs (counseling and prescribed
medications)
Services received outside of the U.S. that are
medically necessary and legal in the U.S.
Exr-1 I ISIONS
Insurance premiums for other health coverage % Marriage counseling fees
purchased. % Stop smoking patches and gum purchased over the
Cosmetic, non -medically necessary services counter
Over the counter drugs — prescribed or non -prescribed % Cost for weight loss program, drugs, or food when for
(including vitamins & herbs) general well being and not medically necessary
Rogaine % Massage therapy for general well being and not
Fees for athletic or health club membership medically necessary
See web page for more details
www.barneyandbarney.com
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DEPENDENT CAR%fLEXIBLE SPENDING ACWUNT GUIDELINE
The Dependent Care (childcare) Flexible Spending Account allows you to set money aside on a pre-tax basis
to reimburse for the cost of childcare expenses for children under the age of 13, or for the care of an
incapacitated spouse or other dependent. when those services are required to allow you (and your spouse) to
work.
ELIGIBLE PARTICIPANTS
You are a single parent; or
You have a working spouse; or
Your spouse is a full-time student for at least five months during
the year while you are working; or
Your spouse is disabled and unable to provide for his or her own
care.
I BIBLE FXPFNSFS
Care provided inside or outside your home by anyone except your
spouse, your dependent for income tax purposes, or your child
underage 19; or
In a child care center; this includes qualified "Away from Home"
facilities (i.e., Day Camp', as long as the child spends at least 8
hours a day at home). A qualified dependent care center is a
place that provides care for more than six children and complies
with all state and local regulations that apply to these centers; or
By a housekeeper whose services include, in part, providing care
for an eligible dependent.
INFLIGIRLIF FXPFNSES
> Overnight camp
Fees charged for field trips, educational. programs, athletic
sessions, day care registration, food, supplies, and before and
after school activities such as athletic programs
Kindergarten fees
Services provided by centers whose primary function is J1Qt child
care (i.e. aquatic centers, recreational center programs).
MAXIMUM FSA CONTRIBUTION
> $5,000 Maximum
y $2,500 if married filing separate, or
Y Your taxable income, or
If you're married, your spouse's taxable
income (if your spouse is incapacitated or a
full-time student, the IRS considers his/her
earned income to be $200 a month for each
dependent, to a maximum of $400 a
month.)
DEPENDEN'LCARE FSA VS,
FEDERAL TAX CREDIT
If your income or combined income is less
than $13,000 or greater than $24,000, the
Dependent Care FSA is generally better
than the Federal Tax Credit. If your income
or combined income is between $13,000
and $24,000, the Federal Tax Credit at
year-end may be better for you. The Chart
on Page B-6 compares the tax implications
of both. For your personal situation, it is
advised that you check with your tax
advisor. If you decide to take the Federal
Tax Credit, you may only use expenses that
have not been reimbursed by your FSA and
that are less than the IRS maximum
allowed.
"During the summer months, there are many types of programs available for children offering various levels of supervision
and activities. Some expenses are clearly NOT eligible for reimbursement from the Dependent Care Flexible Spending
Account. These include:
overnight camps Registration fees, transportation fees, field
summer school trips, charges for food and any other charges
tuition and related expenses to enhance a child's academic skills that are charged separate from the actual
child care.
The IRS DOFS consider charges for day camps to be allowable child care expenses. Unfortunately, the IRS has not given
clear guidance concerning the line between day camp and programs which enhance a child's academic or athletic skills.
Therefore, payment by Barney & Barney does not constitute an opinion that the expenses will be considered IRS approved
Day Care expenses. All plan participants must obtain an opinion from their tax advisor or the IRS to determine if such
expenses are IRS approved Day Care expenses.
In order for Barney & Barney to process any claims for reimbursement of Day Care expenses, participants must provide
ALL of the following:
Name of the day care provider the dates of services
Federal Tax I.D. Number of provider (unless tax exempt) The cost of service within the period of time
Name of child(s) receiving care of service.
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Attention All Employees! IOMW_ Need Extra Cash?
You could be saving Major Dollars Each Year!
Here's How ... join the Flexible Spending Account Program for Dependent Care expenses.
DEPENDENT CARE EXPENSES: Costs for child care (for children under the age of 13) or day care
expenses for elderly or disabled children or spouses.
You could potentially save "BIG" on your income taxes because the dollars you set aside for use in the
plan(s) are pre-tax dollars. That means that you pay no Federal, State or Social Security taxes on those
dollars, which saves you 25% to 35% on taxes. This means more spendable income for you each year
that you participate.
Here is an example of how a Flexible Spending Account can save you money:
Assume this employee is married with two children. Both partners work and their
combined annual income is $45,000. They estimated their eligible annual expenses
as follows:
Dependent Care: $5,000
Without FSA - With FSA
Annual Income
$45,000
$45,000
Amount Paid to FSA
-0-
$ 5,000
Taxable Income
$45,000
$40,000
Estimated Federal Tax
$ 6,750
$ 6,000
Estimated State Tax
$ 1,125
$ 1,000
Social Security Tax
$ 3,443
$ 3,060
Health & Dependent Care Expenses
$ 5,000
-0-
Net Pay
$28,682
$29,940
Tax Savings - Increase in Net Pay
-0-
$ 1,258
By taking advantage of the FSA, this employee will:
Pay LESS in taxes!
Increase net pay by $104.83 per month!
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