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February 25, 1986 <br />Page 2 <br />A Flexible Spending Account also may he estahlished for Group <br />Insurance plans offered by an employer. Those may be short or <br />long term disability income plans or group life insurance plans <br />in excess of amounts offered to all employees. <br />The accompanying material pr,giared by DCA (formerly Deferred <br />Compensation Administrators and Stanton Associates) explains <br />these plans in more detail. <br />In order to establish Flexible Spending Accounts for employees an <br />employer must develop a plan in writing which should be prepared <br />by legal council and administer the plan as well as deduct the <br />employees contribution to the accounts through payroll <br />deduction. <br />Advantages to the Plan are: <br />1. Federal income taxes are reduced for employees <br />2. Employees may use pre-tax dollars to pay for medical benefits <br />not paid by the Group Health Plan. <br />1. The plan is relatively simple and inexpensive to administer. <br />Disadvantages to the Plan are as follows: <br />1. It would increase payroll procedures and it would take the <br />time of someone to administer it. <br />2. Subsequent legislation could modify and/or eliminate FSAs. <br />I have received a copy of a proposal from DCA to design and draft <br />a plan for the City. The cost of this would he approximately <br />$1,500. If it was des.red that someone from DCA come out to the <br />City and conduct an employee meeting to explain the Plan the fee <br />would be an additional $250. <br />I recommend that the City give serious consideration to the <br />establishment of a FSA Plan for its employers. I bolievr this rn <br />be an inexpensive way to provide benefits to the employees. <br />Wds <br />%1W0' <br />