Flexible Spending Account Annual Open Enrollment Q&A

Thank you for choosing Paychex to provide recordkeeping services for your company's flexible spending account (FSA). Before you begin the enrollment process, please review the questions and answers below, as well as the additional information provided in your FSA Employer Enrollment Information booklet. These valuable resources will help you to educate employees about FSA deductions, tax savings, eligibility requirements, and enrollment deadlines.

Q. When can my employees enroll for the 2017 plan year?

A. Employees can enroll or change current elections between Thursday, September 1 and Friday, December 30th, 2016. The effective date for enrollments and changes is January 1, 2017.

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Q. How do my employees enroll?

A. Employees can enroll online at https://www.paychex.com/login/ by selecting the FSA option, or by calling Paychex Employee Services at 877-244-1771. Electronic enrollments offer your employees 24/7 access and immediate election confirmation.

Note: Employees must follow all steps until they receive a confirmation number that verifies they have completed the enrollment process.

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Q. How do my employees know how much to elect?

A. Included in the FSA Employee Information booklet is the Flexible Spending Account Deduction Worksheet*. This worksheet can help employees estimate their annual medical or dependent care expenses. Employees can also use the Employee FSA Tax Savings Calculator to determine how much to contribute to their FSA.

Important: Participants must also take into consideration the maximum amount your company allows for unreimbursed medical expenses and any amount you are contributing toward the plan. The maximum deduction allowed for medical expenses and dependent care expenses can be found in the SPD. The maximum health FSA election for the PEO plan is $2,600.

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Q. How do my employees know which expenses are eligible under the FSA?

A. Employees can view a list of FSA-eligible expenses. This is not an all-inclusive list; however, it includes many common eligible expenses.

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Q. Do all employees need to complete enrollment forms to participate in the new plan year?

A. It depends. Once enrolled, an employee will continue to participate in the plan until he or she chooses to cease participation, or modify the election amount during open enrollment, if the employee does not submit a change, the annual election amount currently on file will be used for the following plan year.

Note: Under the Patient Protection and Affordable Care Act (PPACA), or Health Care Reform, unreimbursed medical expense (UME) employee contributions will be limited to $2,600 annually.

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Q. If an employee chooses not to enroll or make changes to an election during open enrollment, can they enroll or make changes later in the year?

A. No, not unless they experience a qualifying event during the plan year. For more information on qualifying events, employees can visit https://www.paychex.com/login/.

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Q. When will Paychex send open enrollment materials?

A. Open Enrollment Guides will be posted online on August 17–19 and 24–26, 2016 (online.paychex.com). Email notifications will be sent when the guides are posted. The Open Enrollment Eligibility Status Reports will be posted on August 10–12, 2016. Open enrollment materials will not be mailed in hard copy.

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Q. Who is eligible to participate in the plan?

A. Please use the Open Enrollment Eligibility Status Report posted to the Employer Portal to determine who is eligible to participate. This report lists all employees who can participate in the plan for the upcoming plan year. All employees must meet the eligibility requirements that are stated in your Summary Plan Description and summarized at the top of your Eligibility Status Report.

Note: Sole proprietors, partners in a partnership, greater than 2 percent S-Corp owners, and their family members are ineligible to participate in an FSA plan.

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Q. How do I notify Paychex of FSA employer-funded contributions?

A. If your FSA plan offers employer contributions you are able to enter the contribution to each employee's account via the PBA Employer Portal. If you would like to update your plan to allow for employer contributions, please use the Paychex Benefit Account Plan Amendment Request Form to amend your plan. Once your plan has been amended, you will be able to add employer contributions to each employee via the PBA Employer Portal.

Note: The IRS maximum annual employee contribution for Unreimbursed Medical Expenses (UME) for 2017 is $2,600; this plan maximum applies to employee contributions only. Any employer contributions will be added to individual employee contributions; the sum of the employee and employer UME contribution can equal more than $2,600.

Starting in 2014: The employer contribution is limited to two times the employee's annual election or the amount of the employee's annual election plus $500, whichever is greater in accordance with Department of Labor (DOL) guidance.

Employer-funded contributions are not applicable for Paychex HR Solutions – PEO clients.

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Q. How can I verify confirmation of my employees' enrollment?

A. You will receive email notification when the Open Enrollment Eligibility Status Report is available on January 15, 2017 to confirm 2017 enrollments. You can run the Account Balance Report from the PBA Employer Portal at any time to verify who is enrolled.

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Q. Why is it important to communicate the FSA plan to my employees?

A. An FSA plan is an employee benefit. The success of the plan depends in part on its acceptance and use by employees. Employees need to understand how the plan operates, how their choices will affect them, and the tax consequences of their choices.

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Q. What is the tax advantage of a Section 125 plan?

Employee pretax contributions to a Section 125 plan, of which the FSA is a part, are not considered taxable wages (exempt from tax calculations) for federal and state withholding taxes (based on state tax regulations). Contributions are also exempt from federal unemployment taxes and FICA taxes. All other payroll taxes (such as city and local taxes) must be reviewed with your payroll representative to see if additional exemptions may apply.

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Q. Is there a video that my employees can view for more information?

A. Employees can watch a short informational video that gives them more information about the benefits of enrolling in an FSA.

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