Use of FSA, Debit Card Eases Health Care Costs

Wednesday, November 04, 2009

Health care costs are not going away. Whether we like it or not, as the costs climb higher many employers are shifting more of the financial burden onto employees. While many employees try to take on a good, healthy lifestyle to reduce medical bills, sometimes that’s just not enough. One step employees can take is to lower the after-tax cost of their out-of-pocket expenditures by participating in an employer-sponsored Flexible Spending Account (FSA).

Infinisource provides an FSA that also has a debit card option, the Benny Card, which is a great benefit to both employers and employees. The Benny Card is enjoyed by employees because of the ease of use and the elimination of the “double-hit”.  The first hit occurs when money to fund the FSA is automatically deducted from the employee’s paycheck. Without a debit card, the second hit occurs when a participant has to pay for medical expenses as they occur, out-of-pocket. Although the participant will get reimbursed for the expense, there’s a process of completing a claim form, submitting it with receipts and waiting for reimbursement. With the Benny Card, the waiting and funding money upfront is eliminated – and so is the “double hit”.

When an employee is provided the Benny Card, each swipe takes money directly out of the employee’s account. The IRS requires that debit cards only be used to purchase items that are eligible under the applicable Health and/or Dependent Care FSA plan. Many expenses are automatically substantiated at the point of purchase. Employers using the Benny Card often experience auto-substantiation rates of 70 percent or higher, depending on participant activity.

The use of debit cards continues to increase dramatically. Employers reap benefits when employees utilize FSA contributions. For every $1,000 deposited into a tax-free FSA, employers save $76.50 in payroll taxes. Many indications state that FSA participation rates increase between 20 to 40 percent over time with the use of a debit card. To add the Benny Card or to begin an FSA plan with a Benny Card, contact the sales department at Infinisource by calling 800-779-6384 or e-mail solutions@infinisource.net.