This is from a (US) health/dependent care flexible spending account enrollment form.
I have to check one of two boxes. The first is “Yes, I wish to participate…” and leads to specific info.
The second box is “I have been offered the opportunity…and do not wish to enroll at this time.”
So far so good; clear and understandable. But then the text for the second checkbox continues:
That’s the exact text.
Not only do I not understand what it means in regard to my plan benefits, I further don’t understand what it’s trying to say at all. What is the phrase “from my compensation” doing in there, for one thing?
Maybe I’m being picky but this seems both awkward and unintelligible to me.
It means that contributions you make by payroll deduction to your health insurance are subtracted from your salary before the tax withholding is calculated. In other words, it’s like getting an automatic tax deduction for those payments, even though it never shows up on your tax return.
This is true of *everybody * that pays health insurance premiums for an employer health plan.
They probably want you to acknowledge that you understand how your insurance contribution is treated for tax purposes, but I don’t know why they tie that into your declining the flex plan.
Yeah, it’s not in the paragraph associated with the “yes I will participate” checkbox. It’s definitely only associated with the “I decline” checkbox, and immediately follows, as if to imply consequence, “do not wish to enroll.”
I understand that’s the way it generally works if I accept. Well, with one exception – why would it say “reduced” from my salary instead of “deducted”?
I am baffled as to why it would be a consequence of not participating.
I asked the guy who gave me the form and he stared at me for a while and changed the subject.
And it’s not like it would be hard to write it clearly. Do we conclude that skullduggery is afoot, or aggravated inability to communicate?
My WAG is that they’re trying not to come right out and say that, if you turn down the plan, they’re not going to pay you the extra cash into your salary. Maybe they’re keeping it, maybe they have to pay the insurance company regardless.
*What * extra cash? There is no extra cash. There’s nothing for the company to keep or pay. Can you explain what you mean by that? :dubious:
If you sign up for the plan, your contribution to the flex plan comes out of your salary pre-tax, goes into a bucket, and then comes back out of the bucket to you to reimburse you for medical expenses. Effectively you don’t have to pay income tax on any of your income used to pay medical expenses up to a limit, usually up to $5K a year.
If you do *not * sign up for the plan, medical expenses are not deductible from your taxes, except for any portion that exceeds 7.5% of your AGI. :mad: Now you pay the same medical expenses but the money you use to pay is not set aside pre-tax, it was part of your fully taxable salary.
Whether you do or you don’t sign up, your insurance premiums are pre-tax.
The only money the company pays is what it takes to administer the program. They are not paying your taxes for you on your contributions; the whole point of this program is that the government does not collect taxes on that part. However, they do get the investment return on your account, and if you contribute $5K and only spend $4.5K on medical expenses, your company does pocket the difference; it’s use-it-or-lose-it. I believe that opticians sell a lot of eyeglasses in December.
That is how the entire thing works and I don’t see any extra cash in there anywhere. Is this like the bellboy who ends up with $3?
