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February 25, 1986 <br />Page 2 <br />A Flexible Spending Account also may be estahlished for Group <br />insurance plans offered by an employer. These 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 prepared by DCA (formerly Deferred <br />Compensation Administrators and Stanton Associates) explains <br />these plans in more detail. <br />In order to establish Flexible Spending Aecou?I[S fur 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 />employers contribution to the acrounts rhrourih payroll <br />deduction. <br />Advantages to the Plan are: <br />1. Federal income taxes are reduced fur employees <br />2. Employees may use pre-tax dollars to pay for medical benefits <br />not paid by the Group Health Plan. <br />3. The plan is relatively simple and inexpensivu to administer. <br />I <br />Disadvantages to the Plan are as follows: ' <br />1. It. would 1IWI .r„' peyl,.l l pl ure.hn .in,l 11 w„old 1.1kr Iln- <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 tram DC A to design and draft <br />a plan for the City. The cost of this would be approximately <br />$1,500. If it was desired that someone from DCA come out to the <br />City and conJuct 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 employees. I believe this to <br />be an inexpensive way to provide benefits to the employees. <br />DB/ds <br />