What is a flexible benefit plan?
Flexible Spending Accounts provide a tax-advantaged way to pay certain out-of-pocket health care expenses, and work-related dependent care expenses. The plans allow you to pay your expenses with "pre-tax" dollars, which means that you get a tax deduction for these expenses before you ever file your tax return. You don't pay Federal Income or Social Security taxes on this money and, in most states, State tax is exempt.

Health Care Reimbursement Account:
FSA - Flexible Spending Accounts allow employees to set aside a portion of their paychecks (before taxes) into an account to budget for expenses not covered by another health plan. The participant can use the account to pay for over-the-counter medicines, co-pays at the doctor or pharmacy, chiropractic care, eyeglasses, contacts, LASIK, orthodontics, and more.

Dependant Care Reimbursement Account: Employees save 25% to 40% on the cost of daycare for children. Employees set aside pre-tax payroll deductions in the account to budget for the daycare expenses of a dependent child under age 13. Qualified expenses include nannies, babysitters, housekeepers, nurse's fees, and registration fees to a daycare facility. The cost of pre-K or nursery school, before and after school care, and day camp also qualify. To qualify, expenses paid for daycare must allow an employee or the employee's spouse (if they are married) to work or look for employment.

Adoption Reimbursement Account:
Employees set aside pre-tax payroll deductions to pay expenses for home study and application fees, reasonable and necessary legal adoption fees, court costs, attorney fees, agency fees, medical services and counseling, travel and lodging fees, and other expenses which are directly related to, and the purpose of which is for a legal adoption. Adoption expenses that qualify for payment must be for an individual who has not attained the age of 18 at the time of the adoption, a child that is physically or mentally incapable of caring for himself, a child with special needs who cannot or should not be returned to the home of his or her parents and a specific factor or condition makes it reasonable to conclude that the child cannot be placed with adoptive parents unless assistance is provided as determined by a state. The child must be a U.S. citizen or resident. Although the participant won't save FICA on amount set aside in the adoption account, the employee will save federal and state tax (where applicable). The annual limit in 2006 for paycheck contributions to an adoption account is $10,960. The annual limit is phased out ratably for participants with a household Modified Adjusted Gross Income (MAGI) of $164,410, and is completely phased out when MAGI reaches $204,410. Employees that expect to pay more than the annual limit for any single adoption attempt might want to take advantage of both a tax credit on IRS Form 1040 and let the adoption account pay additional expenses.

Additional Benefits and Premium Savings Accounts:
The Premium Only Plan (POP) is a tax-savings plan for groups where employees share in the cost of benefits through payroll deduction. Employees save $25 to $40 on every $100 they contribute through payroll deduction. Qualified contributions include an employee's share of employer-sponsored health, dental, disability, accident, and group-term life insurance. An employee's share of contributions to a health saving account (HSA) will also qualify for tax savings when paid through payroll deduction. The Premium Only Plan saves the employer taxes as well. That's because the employer saves about 8% (the FICA payroll tax match) on every dollar employees contribute through payroll deduction