An employee can reduce their taxable income and avoid paying Social Security and Medicare Tax (5.65%) and Federal Income Tax (15% to 40%) by enrolling in a company-sponsored Flexible Benefits Plan. These tax savings can apply to one or more of the following options:

  1. Premium Conversion Accounts, or Premium Only Plans (POP), allow for the employee portion of qualifying group insurance premiums to automatically be deducted from pay with TAX-FREE dollars.
  2. Health Care Flexible Spending Arrangements (FSA) allow employees to pay for health care expenses for themselves and their families which are not covered by health/dental/vision insurance, including dental, vision, orthodontia, etc. (even those deductibles or co-pays which are the patient’s responsibility), with TAX-FREE dollars.
  3. Dependent Care Assistance Program (DCAP) allows you to pay for child daycare or dependent care expenses up to $5,000 per year TAX-FREE.

The money is held in the plan until you submit a request for reimbursement or your employer pays insurance premiums.
You can include expenses for your spouse if you are legally married and file a joint income tax return. You may cover your children’s expenses if you claim them as dependents on your tax return.

What ASi Does

  • Draft Plan Documents including Plan Document, Summary Plan Description and Corporate Resolution
  • Non-Discrimination Testing
  • Assist in Plan Design
  • Assist Broker in Plan Presentation
  • Assist in Group Enrollment
  • Provide Claims Procedures
  • Enter Claims Daily and Disburse Checks Weekly
  • Provide Monthly, Quarterly, Annual Reports
  • Year-End Plan Review
  • Provide Online Access
  • Provide Debit Cards if Elected by Employer

How You Save Taxes
When you participate in a Flexible Spending Arrangement via salary reduction, you reduce your Federal Income Tax, FICA, Social Security and Medicare, and increase your take-home pay. The money that is deposited into your Flexible Spending Arrangement comes straight out of your gross pay; therefore avoiding taxes.

The following example shows how a single person making $30,000 per year can save $1,692 in taxes annually by contributing $550 per month to an FSA.

Tax Savings Illustration

 Without Flexible
Benefits Plan
With Flexible
Benefits Plan
Gross Monthly Salary$2,500.00$2,500.00
     Qualifying Insurance Premiums$0.00$100.00
     Qualifying Health Care Expenses$0.00$100.00
     Qualifying Dependent Care Expenses$0.00$350.00
Total Qualifying Expense$0.00$550.00
Gross Taxable Income$2,500.00$1,950.00
Income Tax @20% plus F.I.C.A. @5.65%$641.25$500.18
Net Spendable Income$1,858.75$1,449.82
     Post-tax Insurance Premiums$100.00$0.00
     Post-tax Health Care Expenses$100.00$0.00
     Post-tax Dependent Care Expenses$350.00$0.00
Total Post-tax Expenses$550.00$0.00
Net Spendable Income$1,308.75$1,449.82
Increase in Monthly Spendable IncomeN/A$141.07
Increase in Annual Spendable IncomeN/A$1,692.84

As you can see, with only $550 in monthly qualified expenses, by enrolling in the Plan, you would have an extra $141.07/month ($1,692.84/year) of spendable income, the amount you would otherwise be paying in taxes.