Administering
Flexible Spending Accounts - Overview
Four easy steps to the cafeteria plan administration business
1. A plan document is presented to the company and educational materials
are supplied to the employer and all employees. (See the detailed Fast-Flex Plus set up materials
). You use
Fast-Flex Plus software to enroll all interested employees. Each employee
designates how much he would like withheld from each paycheck to cover out-of-pocket
medical and dependent care expenses. These should be conservatively estimated
since the law requires that these pre-tax funds must be used within the
plan fiscal year. Fast-Flex Plus computes and reports the increase in each
employee's after-tax take-home pay and prints a summary report to be left
with the employee.
2. After all interested employees are enrolled, Fast-Flex Plus computes
the total company payroll tax savings. Generally, these payroll savings
more than offset any flex-plan administration fees the company will pay.
In effect, this means the flexible spending account program is free to the
employer.
3. Each pay period the company's payroll department sets aside the total
designated withholding amount. These funds can either be sent to you for
deposit into a cafeteria plan administration bank account or put into their
own cafeteria plan bank account.
4. As employees incur qualified medical or dependent-care expenses, they
mail or fax the receipts to you (the administrator) and request reimbursement.
(A typical reimbursement request form submitted by employees is included
in the detailed set up instructions in this web site.) Once a week, or however
often you decide in conjunction with the company, Fast-Flex Plus prints
the reimbursement checks on either your check stock or the client's with
a click of the mouse.
That's about all there is to it! Once a year, a form 5500 must be filed
with the Department of Labor to insure the plan does not favor highly-compensated
employees. All of the data to fill out the form is computed by Fast-Flex
Plus. Any funds that are not spent by the employees are returned to the
company. Although the company cannot by law return these funds to their
employees, these are frequently used to offset the next year's administration
expenses.
Income Potential as a Third-Party Benefit Plan Administrator
You may have small business clients who still do not have a flexible
spending account plan. Both you and they know that they need one, but until
now neither of you knew how to get it started. As a third-party administrator
for them, you might charge $1.00 per employee per month for "premium-
only" (POP) plan administration. This is an arrangement where only
the employee's health and life insurance premiums are deducted from his
paycheck on a pre-tax basis. If the employee also elects to have out-of-pocket
medical and dependent care costs deducted from his paycheck on a pre-tax
basis, administrators typically charge $3.00 to $7.00 per employee per month.
Therefore, if you administer the plans for 1,000 employees, your revenue
is $3,000 to $7,000 per month. There is no limit to the number of employees
and companies you can administer with the Third-Party Administration version
of Fast-Flex Plus. To make life even easier, Fast-Flex Plus can be installed
on your network so that multiple users can enter data, look up account balances,
and print reports for any employee in any company.
Your overhead expenses as a third-party administrator are minimal. Experience
has shown that by using Fast-Flex Plus, one full-time data-entry person
is needed for roughly every 5,000 plan participants. Postage costs to mail
reimbursement checks directly to employees can be included in the administration
fees you charge, or reimbursement checks can be returned in bulk to the
company for in-house distribution.
Download the Third-Party Administrator version
of Fast-Flex Plus today and begin a win-win business arrangement with all
of your clients.
