Flexible Benefits Plan / Flex Claims / Reimbursement???

Question

What is a Flexible Benefits Plan? Is it offered through your employer or your insurance plan? Why/how do they reimburse you? I just want to understand this cuz I have a day care & a parent gave me a paper to sign for it. Can anyone explain it to me?

Answer 1

A Flexible Benefits Plan (or Flexible Spending Plan, FSA) is offered through your employer, usually in conjunction with their insurance provider.  It allows people to contribute money to the plan pre-tax and then these contributions are used to reimburse people for their out-of-pocket qualified expenses.  The advantage for the participant is that it allows you to lower your taxable income (you don't pay income taxes on the money you contribute to the plan).

For example, I contribute to a plan for child care.  Each month my contribution is deducted from my paycheck.  Then I pay my day care each week with my own money.  So I have paid for day care twice so far (once straight from my paycheck and once from my checking account).  Occasionally I will bring the forms to my day care provider so they can sign them and verify the money I have paid them for child care.  I submit the forms to the plan provider and they send me a check for the amount I have contributed to the plan.  So in the end, I pay for daycare with money that has not been taxed, saving me the taxes I would have paid on the income.  Nothing changes for you as a daycare provider since you are paid the same either way.  You just need to verify that they are claiming the proper amounts on their forms.

I hope this helps.