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Examples
of FSA Tax Savings
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FSA
- Example
of Employer
Savings
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Taken
from a recent FCP client case!
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1. Situation
before FCP Services:
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Company
Size: 423 Full-time employees
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Company
currently had a FSA program implemented, but only had 11%
employee participation (total of 47)
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Average
annual contribution per participant was $600
- Employer
annual tax savings: Approximately $4,590
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2. Enter Flexible
Corporate Plans:
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FCP focused on boosting employee enthusiasm about the FSA
benefit and employee participation—implementing a thorough employee education
and communication campaign, the FlexCard, Web
Access to FSAs, etc.
We
also began furnishing Total Compensation Benefit Statements to
all employees so employer-paid or shared costs would be brought to the
employees’ attention.
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Average
annual contribution per participant increased to $1100
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Annual
employer tax savings now total approximately $12,791
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FSA
- Example
of Employee
Savings
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Data
from this example is from an actual FCP client case!
Situation: Liz Brooks is a
single parent with two children young children in daycare. Her annual
salary is $38,500. Her annual eligible daycare and health care out of
pocket costs are as follows:
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Now
let’s compare at Liz’s actual costs
with and without an FSA.
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Without
a Flexible Spending Account |
With
a Flexible
Spending Account |
| Annual
Income |
$38,500.00 |
$38,500.00 |
| Medical
Spending Account Contribution |
$0.00 |
-$1,276.00 |
| Dependent
Care Account Contribution |
$0.00 |
-$5,000.00
(Maximum
dependent care contribution allowed) |
| Adjusted
Taxable Income |
$38,500.00 |
$32,224.00 |
| Taxes
Paid (28%) |
-$10,780.00 |
-$9,023.00 |
| After-tax
Income |
$27,720.00 |
$23,201.00 |
| Medical
& Child Care Costs |
-$6,276.00 |
$0.00 |
| Spendable
Income |
$21,444.00 |
$23,201.00 |
| Tax
Savings |
$0.00 |
$1,757.00 |
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Full
Cafeteria Plan
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FCP enrolled 628 employees of a multi-state financial services
company in a Full Cafeteria Plan:
Employees chose to purchase pre-tax benefits including health
insurance, group life insurance, dependent life insurance and
medical and dependent care spending accounts. Other benefits,
such as Supplemental Life Insurance, were purchased with
after-tax dollars.
RESULTS: Elections for pre-tax benefits resulted in a $773,000
reduction in taxable payroll and over $59,000 savings in
F.I.C.A. and Medicare taxes for the employer.
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