125 Enrollment Information 2009-10

Your Simpson Tax Saver 125 Plan Allows You To:

1. Pay for Simpson College sponsored health insurance premiums with pre-tax dollars.

2. Pay for many of your current expenses with pre-tax dollars through

Medical reimbursement account for medical, dental and vision expenses not covered by insurance.
Dependent care reimbursement account for work related dependent care expenses for children, disabled spouse or dependent parent.

Frequently Asked Questions Regarding Flexible Spending Accounts

What is a Flexible Spending Account?

A flexible spending account is an innovative way for you to reduce your taxes and increase your take home pay. The Medical and Dependent Care Reimbursement Accounts allow you the flexibility to pay for medical and dependent care expenses with pre-tax dollars. Your participation in either of these accounts increases the amount of your take home pay.

How does a Flexible Spending Account work?

At the beginning of each plan year, you estimate your out-of-pocket expenses for medical and/or dependent care and elect an annual amount to cover those expenses. It is important to estimate expenses carefully, since any money left in the account will be lost. The elected amount is then divided by the number of pay periods for the year and is deducted pre-tax from your paycheck each pay period. When you have incurred an out-of-pocket expense, simply submit a claim form and attach the supporting documentation, and you will be reimbursed with your tax-free dollars. You never pay taxes on the money you put into your Flexible Spending Account. There are two types of Flexible Spending Accounts you can contribute to:

Medical Reimbursement Account: At this time, the income tax laws do not permit you to deduct medical expenses totaling less than 7.5% of your adjusted gross income, the Medical Reimbursement Account offers an alternative way to save on taxes.

Dependent Care Reimbursement Account: This account may benefit you if you pay for dependent care, after school care or day camp for a child under the age of 13; or for the care of a disabled child or adult who is your dependent.

What is an allowed expense?

The Medical Reimbursement Account can be used for you or your eligible dependents for qualified medical expenses which are deductible for income tax purposes under Section 213 of the Internal Revenue Code. However, all expenses must be incurred during the plan year and must be "medically necessary."

The Dependent Care Reimbursement Account requires work-related expenses to be incurred during a period in which both you and your spouse are gainfully employed, seeking employment or are a full-time student. These expenses must also be incurred during the plan year.

Is there any difference in the way the two accounts pay?

Yes. The Dependent Care Account pays you based on the balance in the account at the time of processing. This balance is determined by your payroll withholding. The Medical Reimbursement Account pays you up to the annual amount elected, less any previously paid amounts, regardless of payroll withholding to date.

Can I change my election during the plan year?

Yes. Your level of contribution can be changed during open enrollment for the upcoming plan year or upon a change in status as defined pursuant to Income Tax Regulation 1.125-2(Q/A-6(c)). (See below)

A change in status includes but is not limited to the following:

Marriage
Legal separation or divorce
Death of a spouse or dependent
Birth or adoption of a child, or addition of another dependent
Termination or commencement of your spouse's employment
Loss of a dependent's eligibility under either the participant or spouse's plan
Change from part-time to full-time or vice versa for you or your spouse
Taking an unpaid leave of absence by you or your spouse

How do I get reimbursed?

Once expenses are incurred, simply complete a claim form, attach a statement from the provider of service or an insurance statement, and submit it to:

Alliance Benefit Group
Attn: Flex Department
PO Box 1226
Albert Lea, MN 56007

Or fax your claims to: 866-254-6490

Or you may submit an electronic copy (PDF) of your receipt to:
Claims@abg-mn.com

If you choose to fax or e-mail your claim, it is not necessary to mail the original copy. You may verify that your information was received by calling the Customer Service Line at 1-877-661-4727.

When submitting claims to Alliance Benefit Group, there are a few important things to keep in mind. Following these basic claims submission guidelines will help prevent denials, and in turn, get your reimbursements to you in the quickest possible manner.

Always include documentation to support items you are claiming. This documentation must indicate what service/item you are claiming, name of the provider, date of service, and the amount you are required to pay.
For dependent Care only, the provider's signature in box (8) of the claim form will suffice as support for that claim. If the signature is provided, no additional receipts are required.
Retain copies of all documentation submitted, as well as the yellow copy of your claim form.
Claim form must be completely filled out, signed by the participant and dated. Claim forms with participant's signature absent are subject to denial.

When will I receive my reimbursement?

Reimbursement checks are prepared on the 6^th and the 21^st of each month. Requests received prior to 8:00 a.m. the day of processing will be eligible for payment. Requests received after 8:00 a.m. will be held until the next processing date. Reimbursement checks are typically received on campus and distributed through campus mail within just a few days.

How do I check the balance in my account?

Each time you receive a reimbursement check, your account information will be printed on the check stub. You may also view your account on-line at www.myabg.com. Simpson College will also receive regular reports, which will give you the ability to verify account information with the Human Resources Department.

What happens if I do not use all of the money in my reimbursement accounts?

Be sure to estimate carefully. Generally you must incur expenses for all of the money in your Medical and/or Dependent Care Reimbursement Accounts by the end of the plan year, there is however a 2 ½ month grace period. Per the Internal Revenue Service, any money left unspent in either account at the end of the plan year and the subsequent 2 ½ month grace period will be forfeited. If you leave the College during the plan year, only medical expenses incurred during your employment period will be eligible, unless you elect COBRA continuation coverage for the Medical Reimbursement Account. Dependent care expenses can be claimed until your account balance is paid to you in full. Dependent care is not an eligible COBRA benefit.

Is a Medical Reimbursement Account right for me?

Your Flexible Spending Account can provide a convenient way for you to pay for medical, dental and vision expenses and save valuable tax dollars at the same time. If any of the following apply to you or your family, you are an excellent candidate for a Flexible Spending Account:

Do you, your spouse or dependents plan to purchase eyeglasses, contact lenses or have corrective laser eye surgery expenses that are not covered by your insurance?
Do you, your spouse or dependents expect to have any dental or orthodontia expenses that are not fully covered by your insurance?
Do you, your spouse or dependents have routine medical or drug expenses that are not fully covered by your insurance?

How do I benefit from a Medical Reimbursement Account?

The following comparisons illustrate the difference in paying medical expenses with and without a Medical or Dependent Care Reimbursement Account:

Calculation without a Medical Reimbursement Account		Calculation with a Medical Reimbursement Account
Gross Annual Salary	25,000	Gross Annual Salary	25,000
Less:		Less:
Withholding Taxes	1,732	Medical Reimbursement Account	1,000
Social Security	1,913	Taxable Income	24,000
Net Pay	21,355	Less:
Less:		Withholding Taxes	1,556
Medical Expense	1,000	Social Security	1,836

Net Take-Home Pay	20,355	Net Take-Home Pay	20,608

NOTE: Both examples assume the employee is married and claiming two exemptions. As illustrated in the comparison, the individual electing to use a Medical Reimbursement Account had an additional $253 in Net Take-Home Pay. Tax savings may differ depending on income, withholding status, exemptions, and annual medical expenses.

What Expenses Does Medical Reimbursement Cover?

Medical Reimbursement covers expenses that are necessary to treat or alleviate a physical or mental defect or illness. These can be (but are not limited to) clinical, dental, orthodontic, vision, chiropractic or pharmaceutical expenses. (See list on pages 9& 10.)

Note: If you are enrolled in the HSA plan the qualified expenses will be limited to dental, vision and orthodontic expenses only.

Are Over-the-Counter Expenses Covered by A Medical Reimbursement Account?

In some cases Over-the-Counter expenses may be covered:

Over-the-Counter Drug Reimbursement Guidelines

In order to be reimbursed for eligible over-the-counter expenses from your Medical Reimbursement Account, it is important to keep the following things in mind:

Item must be for the employee, their spouse or eligible dependent.
Receipt for item must be attached to claim, and must include date of purchase, name of OTC item and amount paid for OTC item.
Items purchased must be for treatment of a medical condition, illness or injury.
Items used to maintain general health, or for cosmetic purposes are not allowed.
Items purchased must be in reasonable amounts, stockpiling is not allowed.

Some OTC items may have a medical purpose, as well as a personal or cosmetic purpose. In order for these items to be covered, they must be accompanied by a letter from a physician stating their medical necessity.

Note: The IRS specifically prohibits "stockpiling" of over-the-counter drugs and medications. Alliance Benefit Group will deny claims with unreasonable amounts of over-the-counter expenses.

What Are Dual Purpose Expenses?

There are some expenses that may be considered cosmetic or general use items that may also serve a medical purpose. If a doctor recommends a service/item that would not normally be considered "medically necessary" to treat or alleviate a specific diagnosable medical condition, it is considered a dual-purpose expense. A written statement from the physician must accompany these expenses. This statement must explain what the condition is, what service/item is recommended and how it will alleviate this condition.

What to Submit With Your Claim?

Supporting documentation is required for all expenses that are submitted for reimbursement. This documentation must be itemized, showing date(s) of service and must clearly illustrate the amount you are responsible for paying. If the expense was covered by insurance, the Explanation of Benefits from your insurance company must be submitted with your claim.

DEPENDENT CARE EXPENSES: TAX DEDUCTION VS. TAX CREDIT

Under federal tax law, there are two methods for receiving a partial reimbursement of your work-related child and dependent care expenses through federal income tax savings. The methods are the dependent care reimbursement account offered through our Tax Saver 125 Plan and the child and dependent care credit used at the time of filing income tax returns. Each method has a limit on the amount of child and dependent care expenses that are eligible; and, of course, you cannot use both tax benefits for the same expense amounts. The definition of eligible expenses for both methods can be found in the Qualifying Dependent Care Expenses section of this document. The purpose of this comparison is to assist you in determining which method is more advantageous to you.

CHILD AND DEPENDENT CARE CREDIT - Form 2441

The child and dependent care tax credit allows for a credit of between 20% and 35% of eligible dependent care costs. The credit cannot be claimed on more than $3,000 of expenses for one dependent, or $6,000 for two or more dependents. A credit of 35% of eligible expenses is available if your family's annual adjusted gross income is $15,000 or less. The credit is reduced by one percent for each additional $2,000 (or fraction thereof) of income over $15,000. For example, if a family's adjusted gross income is $19,500 they would be eligible for credit of 32% of their eligible dependent care expenses. Once adjusted gross income exceeds $43,000 the credit is limited to 20%.

DEPENDENT CARE REIMBURSEMENT ACCOUNT

The Dependent Care Reimbursement Account permits you to reduce your taxable income up to $5,000 (without regard to the number of dependents you have) by converting a portion of your compensation to non-taxable dependent care benefits. By using a Dependent Care Reimbursement account, a portion of your salary is placed in a pre-tax account from which you are reimbursed for qualifying dependent care expenses and reimbursements from the account are not subject to tax when you file your income tax return. Please remember any amount remaining in your account at the end of the plan year will be forfeited.

WHICH METHOD IS MORE BENEFICIAL?

The method most beneficial to you depends on your family's adjusted gross income and the number of eligible dependents.

A family whose income falls in the 27% federal income tax bracket will almost certainly qualify for a tax credit less than 27% using the child and dependent care credit. Therefore, a Dependent Care Reimbursement Account should be more beneficial.

A family whose income falls in the 15% tax bracket should carefully consider which option is most advantageous, because salary reductions that go into your Dependent Care Reimbursement Account are also exempt from Social Security and state income taxes. Which means a family in the 15% income tax bracket would receive a savings of 22.65% in combined taxes. A family's adjusted gross income must be less than $24,000 for the tax credit to be more beneficial. However, even when your income is less than $24,000, it may be advantageous to use a Dependent Care Reimbursement Account.

Is a Dependent Care Reimbursement Account right for me?

Your Dependent Care Reimbursement Account can provide a convenient way for you to pay for dependent care expenses and save valuable tax dollars at the same time. If any of the following apply to you, you may benefit from a Dependent Care Reimbursement Account:

Do you pay for after school care or day camp for a dependent child under age 13?
Do you pay for the care of a disabled adult who lives in your house and is your dependent?

The following comparisons illustrate the difference in paying dependent care expenses with and without a Dependent Care Reimbursement Account:

Calculation without a Dependent Care Reimbursement Account		Calculation with a Dependent Care Reimbursement Account
Gross Annual Salary	25,000	Gross Annual Salary	25,000
Less:		Less:
Withholding Taxes	1,732	Dependent Care Reimbursement Account	3,000
Social Security	1,913	Taxable Income	22,000
Net Pay	21,355	Less:
Less:		Withholding Taxes	1,248
Dependent Care Expense	3,000	Social Security	1,683

Net Take-Home Pay	18,355	Net Take-Home Pay	19,069

NOTE: Both examples assume the employee is married and claiming two exemptions. As illustrated in the comparison, the individual electing to use a Dependent Care Reimbursement Account had an additional $714 in Net Take-Home Pay. Tax savings may differ depending on income, withholding status, exemptions, and annual dependent care expenses. Detailed tax tables and worksheets are available from Human Resources; call ext. 1576 to receive a copy.

QUALIFYING DEPENDENT CARE EXPENSES

Under the plan, you will be reimbursed only for dependent care expenses meeting all of the following conditions:

The expenses are incurred for services rendered after the date of election and during the plan year that runs from July 1 through June 30.
Each individual for whom you incur the expense is:

a. A dependent under age 13 whom you are entitled to claim as a dependent (or child or other dependent under age 13 whom you are supporting, but are not entitled to claim as a dependent only because of a written declaration or decree of divorce) on your federal income tax return, or

b. A disabled spouse or other tax dependent (i.e. a child you are supporting, but are not entitled to claim as a dependent only because of a written declaration or decree of divorce; or a dependent parent) who is physically or mentally incapable of caring for himself or herself.
The expenses are incurred for the care of a dependent described above, or for related household services, and are incurred to enable you to be gainfully employed.
If the expenses are incurred for services outside your household, they are incurred for the care of a dependent who is described in 2(a) above, or who regularly spends at least 8 hours per day in your household.
If the expenses are incurred for services provided by a dependent care center (i.e., a facility that provides care for more than six individuals not residing at the facility), the center complies with all applicable state and local laws and regulations.
The expenses are not paid or payable to a child of yours who is under age 19 at the end of the year in which the expenses are incurred.
The expenses are not paid or payable to an individual for whom you, or your spouse, are entitled to claim a personal tax exemption for as a dependent.

MEDICAL AND DEPENDENT CARE EXPENSE PERSONAL WORKSHEET

Simpson College's Tax Saver 125 Plan allows you to pay uninsured medical and for work related dependent care expenses on a pre-tax basis. If you elect to participate in this plan, you will designate a portion of your salary to be deposited into your reimbursement account(s). The payroll deductions are taken before federal, state and social security taxes are withheld from your salary, thereby reducing your taxable income and increasing your take home pay.

Use this worksheet to help estimate your eligible medical and dependent care expenses.

                         Next Year's
    Past 12          Projected
    Months           Expenses

I. MEDICAL REIMBURSEMENT ACCOUNT ($3,000 annual limit)

A. Medical care expenses (not covered by insurance)

Deductibles	$	$
Co-payments	$	$
Prescription drugs	$	$
Non-Prescription drugs	$	$
Immunizations	$	$
Physical Exams	$	$
Transportation (necessary for medical care)	$	$

B. Dental care expenses (not covered by insurance)

Deductibles	$	$
Co-payments	$	$
Orthodontia services (not cosmetic related)	$	$

C. Vision care expenses (not covered by insurance)

Eye exams	$	$
Contact lenses, solutions and cleaners	$	$
Prescription glases/lenses	$	$
Laser eye surgery	$	$

II. DEPENDENT CARE REIMBURSEMENT ACCOUNT
Federal Limits: $5,000 married filing joint or single head of household
$2,500 married filing separately

Weekly Expense x Number of Weeks = Next Year's Projected Expense

_________ X __________ = $ __________

                                                                                        $________     $________

                                                          TOTAL                $_______    $_______

It is important to plan carefully when making your decision about the amount of salary you elect to contribute to your reimbursement accounts. Per IRS Regulations, any money left unspent in your accounts will be forfeited at the end of the plan year. Here are some important points to keep in mind when you estimate your eligible medical care and/or dependent care expenses:

The Medical and Dependent Care Reimbursement Accounts are completely separate. Money from the Medical Reimbursement Account cannot be used to pay dependent care expenses or vice versa.
If you're not sure of the cost for a particular service or medical care item, it's better to use a conservative estimate so you don't risk overestimating.

Medical Reimbursement Account
Allowed Expenses

Acupuncture	Eye Exams/Glasses	Over-the-Counter Medicines (see guidelines)
Alcoholism Treatment	Fertility Treatment	Ovulation Monitor
Ambulance	Flu Shots	Oxygen
Artificial Limbs/Teeth	Glucose Monitoring Devises	Physical Exams
Aspirin	Guide Dog	Physical Therapy
Bandages	Hearing Aids	Pregnancy Test
Birth Control Pills	Home Care	Prescription Drugs
Blood Pressure Monitoring Devises	Hormone Replacement Therapy	Prosthesis
Blood Sugar Test Kit	Hospital Services	Psychiatric Care
Body Scan	Immunizations	Psychologist
Chelation (EDTA) Therapy	Inclinator	Reading Glasses
Chiropractors	Insulin	Screening Tests
Circumcision	Laboratory Fees	Sleep Deprivation Treatment
CoPays/Deductibles	Laser Eye Surgery	Smoking Cessation Program
Condoms	Learning Disability (special school)	Sterilation Procedures
Contact Lenses and Related Material	Medical Records Charge	Supplies for Medical Condition
Counseling (excludes marriage)	Medical Services	Surgery
Crutches	Nursing Services	Therapy
Dental Treatment	Obstetrical Services	Transplants
Dentures	Occlusal Guards	Vaccines
Diabetic Supplies	Operations	Vasectomy
Diagnostic Services	Optometrist	Vision Correction Procedures
Drug Treatment	Orthodontia	Wheelchair
Egg Donor Fees	Osteopath	X-Ray Fees

Allowed Expenses - Over-the-Counter: Items must be used to prevent or alleviate a physical or mental defect or illness. Items must be primarily medical in nature.

Allergy Medicine	Cough Drops	Nasal Sinus Sprays
Analgesics	Crutches	Nicotine Patches/Gum
Antacids	Decongestants	Oxygen Equipment
Antibiotics, First Aid	Diabetic Supplies	Pain Relievers
Anti-Diarrhea Medicine	Diaper Rash Treatment	Pedialyte
Antihistamines	Digestive Aids	Pregnancy Test Kits
Anti-Inflammatory	Expectorants	Prenatal Vitamins
Aspirin	Eye Drops	Psoriasis Treatment
Band-Aids/Bandages	First Aid Kits	Reading Glasses
Burn Treatments	Hemorrhoid Treatment	Sinus Medication
Cold and Flu Medicine	Incontinence Supplies	Skin Irritation Treatment
Cold/Hot Packs	Insect Bite/Sting medicine	Sunburn Treatment
Contact Lenses	Laxatives	Thermometers
Contraceptives	Menstrual Pain Reliever	Throat Lozengers
Corn and Callus Removers	Motion Sickness Medicine	Wart Removers

Dual Purpose Expenses: Items that may serve a medical purpose, as well as a cosmetic or general health purpose. These items must be accompanied by a physician's statement.

Acne Treatment	Health Club Dues	Shampoo, Medicated
Air Purifiers/Humidifiers	Hormone Therapy	Special Foods (excess cost only)
Breast Pumps	Language Therapy (for disability)	Sperm Storage Fees
Capital Expenditures	Massage Therapy (injury)	St. John's Wort
Chondroitin (arthritis)	Mattress	Sunscreen
Ear Plugs	Nasal Spray/Strips for Snoring	Treadmill
Exercise Equipment (not for general health)	Nutritional Supplements	Varicose Veins Treatment
Exercise Programs (Yoga)	Orthopedic Inserts	Vitamins & Minerals
Fiber Supplements	Orthopedic Shoes	Weight Loss
Glucosamine (arthritis)

Disallowed Expenses:

Appearance Improvements	Electrolysis	Medicare Part B Premiums
Baby-Sitting/Child Care	Face Lifts	Personal Use Items
Birthing Classes	Funeral Expenses	Pre-payment for Services
COBRA Premiums	Genetic Testing	Retin-A
Controlled Substances	Hair Removal	Rogaine
Cosmetics	Household Help	Safety Glasses
Cosmetic Procedures	Illegal Operations	Shipping and Handling Fees
Chemical Peels	Insurance Premiums	Student Health Fees
Dancing Lessons	Lifetime Care	Sunglass Clips
Diapers	Long-Term Care	Tanning Salons/Equipment
DNA Collection/Storage	Maternity Clothes	Teeth Whitening

Disallowed Expenses - Over-the-Counter

Antiperspirant/Deoderant	Feminine Hygiene Products	Shipping and Handling Charges
Blemish Concealer	Hair Growth/Removal Products	Skin Lotion
Cosmetics	Holistic Remedies	Suntan Lotion
Cotton Balls	Mouth Wash	Swabs
Dental Floss	Powder, Baby or Talcum	Teeth Whitening Products
Denture Care Products	Service Agreements (glasses or contacts)	Toothpaste/Toothbrushes
Face Creams	Shampoo