This topic came about while at lunch, when a colleage wanted to know about Cafeteria Plan in Benefits.
A Cafeteria plan is a type of employee benefit plan offered in the United. Its name comes from the earliest such plans that allowed employees to choose between different types of benefits, similar to a cafeteria lunch menu that you can choose and order. This plan first started in 2005 through which employers could design plans that provided reimbursement benefits on health insurance, group-term life insurance and Flexible Spending Accounts. A certain portion of the employee’s salary is deducted every month and deposited into this account. These deductions are treated as pre-tax deductions and hence attract employee participation
A Flexible Spending Account (FSA) allows an employee to set aside a portion of his or her earnings to pay for qualified expenses as established in the cafeteria plan, most commonly for medical expenses but often for dependent care or other expenses. Money deducted from an employee's pay into an FSA is not subject to payroll taxes, resulting in a substantial payroll tax savings.
There are several types of FSAs and the most popular types are:
Medical Expense FSA
This is used to pay medical expenses that are not paid by the insurance companies. Such expenses usually include Copayments or other deductibles or other expenses that are generally not covered by dental or vision policies including over-the-counter (OTC) drugs.
Remember, a medical FSA will not reimburse expenses for health insurance premiums, cosmetic items such as cosmetic surgery, equipments, or items that improve "general health".
Recently companies that provide FSA programs have introduced FSA debit card that allows for the automatic electronic transfer of pre-tax dollars from an employee account when paying for qualified expenses. Employees are able to receive immediate reimbursement of their medical, dependent care, and commuter expenses simply by using their card at the point of service.
Dependent Care FSA
FSAs can also be used to pay certain expenses for the dependents, like child care, or parental care (for dependent parents who stay with the employee). The dependent care FSA is federally capped at $5,000 per year. While married spouses can each elect to have this amount deducted from their paycheck and applied to expenses, at tax time all withdrawals in excess of $5,000 are taxed. Unmarried couples can each deduct and use $5,000.
Flexible Spending Account plans help employees to reduce their taxes and in turn, save more. They can save on out-of-pocket healthcare and childcare expenses through FSA.
There are several vendors who provide FSA services. Some of the key service providers include: WageWorks, PayFlex, Aflac etc.
Business process: The Business process in most companies generally works like this:
· An employee who wishes to enroll into FSA plan approaches the company either as a new hire or during open enrollment and selects a particular plan.
· This enrollment information is sent by the organization’s benefits department to the service provider, like say Aflac or Mellon Bank.
· The service provider, would then calculate and inform the amount (to the Benefits department) that has to be deducted from the employee’s salary.
· This information is then fed by to the Payroll system, which would then make the deduction from the employee’s payroll.
· This information is then sent to the Benefits department, which arranges to send the amount to the service provider.
Role of the Consultant
As an Oracle Apps functional consultant, you would have to identify and map this business process flow; identify the data elements that are generated at various sources and prepare a flow diagram to show the data flow process. Once you get the client’s agreement and concurrence on the Business and data flow process, it would help you to prepare a technical specification and hand over the same to your technical team for preparing the interfaces.
In many cases these service provider will perform the necessary calculation and handle the claims directly with the employees. However, the ERP system, such Oracle Core HR or Benefits will be responsible for housing the employee and compensation/benefits data.
A Cafeteria plan is a type of employee benefit plan offered in the United. Its name comes from the earliest such plans that allowed employees to choose between different types of benefits, similar to a cafeteria lunch menu that you can choose and order. This plan first started in 2005 through which employers could design plans that provided reimbursement benefits on health insurance, group-term life insurance and Flexible Spending Accounts. A certain portion of the employee’s salary is deducted every month and deposited into this account. These deductions are treated as pre-tax deductions and hence attract employee participation
A Flexible Spending Account (FSA) allows an employee to set aside a portion of his or her earnings to pay for qualified expenses as established in the cafeteria plan, most commonly for medical expenses but often for dependent care or other expenses. Money deducted from an employee's pay into an FSA is not subject to payroll taxes, resulting in a substantial payroll tax savings.
There are several types of FSAs and the most popular types are:
Medical Expense FSA
This is used to pay medical expenses that are not paid by the insurance companies. Such expenses usually include Copayments or other deductibles or other expenses that are generally not covered by dental or vision policies including over-the-counter (OTC) drugs.
Remember, a medical FSA will not reimburse expenses for health insurance premiums, cosmetic items such as cosmetic surgery, equipments, or items that improve "general health".
Recently companies that provide FSA programs have introduced FSA debit card that allows for the automatic electronic transfer of pre-tax dollars from an employee account when paying for qualified expenses. Employees are able to receive immediate reimbursement of their medical, dependent care, and commuter expenses simply by using their card at the point of service.
Dependent Care FSA
FSAs can also be used to pay certain expenses for the dependents, like child care, or parental care (for dependent parents who stay with the employee). The dependent care FSA is federally capped at $5,000 per year. While married spouses can each elect to have this amount deducted from their paycheck and applied to expenses, at tax time all withdrawals in excess of $5,000 are taxed. Unmarried couples can each deduct and use $5,000.
Flexible Spending Account plans help employees to reduce their taxes and in turn, save more. They can save on out-of-pocket healthcare and childcare expenses through FSA.
There are several vendors who provide FSA services. Some of the key service providers include: WageWorks, PayFlex, Aflac etc.
Business process: The Business process in most companies generally works like this:
· An employee who wishes to enroll into FSA plan approaches the company either as a new hire or during open enrollment and selects a particular plan.
· This enrollment information is sent by the organization’s benefits department to the service provider, like say Aflac or Mellon Bank.
· The service provider, would then calculate and inform the amount (to the Benefits department) that has to be deducted from the employee’s salary.
· This information is then fed by to the Payroll system, which would then make the deduction from the employee’s payroll.
· This information is then sent to the Benefits department, which arranges to send the amount to the service provider.
Role of the Consultant
As an Oracle Apps functional consultant, you would have to identify and map this business process flow; identify the data elements that are generated at various sources and prepare a flow diagram to show the data flow process. Once you get the client’s agreement and concurrence on the Business and data flow process, it would help you to prepare a technical specification and hand over the same to your technical team for preparing the interfaces.
In many cases these service provider will perform the necessary calculation and handle the claims directly with the employees. However, the ERP system, such Oracle Core HR or Benefits will be responsible for housing the employee and compensation/benefits data.
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