FSA & DCAP

1. FSA & DCAP Introduction & Program Overview Presented by ASIFlex

2. Pre-Tax Spending Accounts Two Types of Accounts: • FSA • Pre-tax money for out-of-pocket medical expenses • Expenses can be for you, your spouse or any of your tax dependents (regardless of whose insurance the dependent is on) • Dependent Care Assistance Program (DCAP) • Allows for reimbursement for childcare expenses • Elder care expenses also eligible

3. What is the advantage? Most employees save at least 20% on each dollar that is contributed • For example: • Federal taxes 15% • F.I.C.A 7.65% • Total 22.65% x $100 = $22.65 • Check out the Tax Savings Calculator at www.asiflex.com/pebb to see your expected savings

4. This means…. $200

5. Are purchased for 20% less… $200 Only $160

6. Health Care Spending Account Program Overview

7. What Expenses are Eligible for a Tax Break? • All medical expenses as defined in Section 213 of the Internal Revenue Code • Insurance premiums and long term care are not eligible • Detailed list of eligible expenses on www.asiflex.com • Qualifying expenses for you or your dependents whether or not on your employer’s insurance policies • E.g. your spouse can be on a different employer’s insurance program and still have expenses qualify through your plan • Any medical service provided during the plan year that insurance does not reimburse

8. Commonly Claimed Expenses

9. How does the program work?

10. Select your election amount • Enrollment must be completed during the State of Washington’s Open Enrollment Period • Open enrollment ends November 30th, 2007 • Enroll online at www.asiflex.com/pebb • Up to $2,400 per plan year per participant • If your spouse works for the State of Washington, you may each set aside up to the max • Annual election amount deducted over the course of the plan year (January 1, 2008 –December 31st, 2008) • Full Annual Election available to you January 1

11. How do I access the money?

12. Two Options: 1) Submit a claim & supporting documentation & receive reimbursement Or 2) Utilize the FSA Debit card to pay for certain expenses

13. Option 1

14. Incur Expense and Submit Claim Form 1. Write your name 2. List the services 3. Sign the form

15. Attach a written statement from the provider 2/14/07

16. Receive reimbursement • ASIFlex can issue direct deposits to a checking or savings account • If you are already enrolled for DD, you don’t need to set this up again; it will stay the same from year-to-year • You can sign up to receive notice of reimbursements via email • Payments are issued within one business day of receipt of the claim (up to your annual election)

17. Option 2

18. FSA Debit Card • The Debit Card is optional to health care FSA users. • An application for the card will come with your confirmation of enrollment packet • If you had the card in 2007, you do not have to re-apply • The debit card will be issued within 10 business days of ASIFlex’s receipt of the application. • If you currently have a card, it is still valid (you do not need to re-apply)

19. FSA Debit Card (cont’d) • Use the debit card for out-of-pocket medical expenses only • Cannot be used to pay for DCAP expenses • Card use is restricted to use at: • Known Health Care Providers • Retail outlets with an inventory control system in place

20. Known Health Care Providers • Health Care Providers include: • Hospitals • Health clinics • Opticians • Dental Offices • Pharmacies • Typically pharmacies within grocery stores do not meet this qualification • The card reads the Merchant Category Code (MCC) when it is swiped and the card determines if the provider has an acceptable MCC • If it does not have an allowable MCC, the card will be declined

21. Inventory Control System • The card can be used at retail outlets that do not have a health care MCC if the retail store has implemented the inventory control system • This system only allows eligible expenses to be paid for with the card • E.g. if you attempt to purchase a six pack of cola and a bottle of aspirin, the card will pay for the aspirin and then you will have to provide a separate form of payment for the cola • No documentation required for purchases at these stores

22. Inventory Control System • Currently in place at: • Wal-Mart Stores • Sam’s Club • Walgreens • Drugstore.com • Many more anticipated as of 1/1/08 • Safeway • CVS • Jewel/Osco • Target

23. Documentation Requirements • Every debit card transaction will have to be substantiated somehow, either electronically or with a paper claim • Electronic substantiation • Known co-pays • Multiples of up to five known co-pays • Purchases made at retail outlets with inventory control system • Paper claims must be submitted for all other transactions

24. Dependent Care Assistance Program

25. ASIFlex is taking over the DCAP • ASIFlex will administer the DCAP for services provided from 1/1/08 forward • All claims for services provided in 2007 must be submitted to DRS • If you submit claims for services in 2007 to ASIFlex, they will be returned to you unpaid

26. Dependent Care Assistance Program • Provides a tax break on child/elder care expenses incurred while: • You go to work Or • You and your spouse (if married) go to work Or • You go to work and your spouse: • Looks for work • Pursues an educational opportunity • Other expenses are not eligible. • i.e. getting a babysitter for Friday night date night is not an eligible expense

27. Eligible Dependents • Children under the age of 13* • Older dependents unable to care for themselves who live in your home at least 8 hours per day * Must be custodial parent with over 50% custody if divorced.

28. Eligible Expenses • Day care services • General purpose day camps • Babysitters • Pre-school

29. Ineligible Expenses Include: • Costs of food and transportation if itemized • Educational expenses • Includes private schools • Overnight camps • Payments to your spouse or any other dependent of yours • Payments to your child under 19, even if he/she is not your dependent

30. How does the program work?

31. You enroll each year • Family maximum of $5,000/year • This is an IRS maximum per household • Example: $2,600 for the plan year contributed each paycheck for 26 checks = $100.00 per check

32. How do I access the money?

33. By submitting a claim form to ASIFlex 1. Write your name 2. List the services 3. Have the provider sign the form 4. Sign the form

34. Provide written statement from providerOnly necessary if provider’s signature not on claim form April 1 to April 30, 2007

35. Receive payment • Deposit directly into your bank account • Receive notice of deposit via email • Payments are made within one business day of receipt

36. Important points to remember • Funds in one category cannot apply to expenses in another category. • Expenses for services provided during the plan year and the additional 2 1/2 month grace period. • Unused funds will go back to your employer. • Use it or lose it • Start small if you are unsure of how much you will actually spend

37. 2 ½ Month Grace Period • 2008 Plan year is 1/1/2008 - 12/31/2008 • Expenses for services provided 1/1/2009 – 3/15/2009 can be used to claim 2008 Plan Year funds • Grace period provides extra time to incur expenses if you set aside too much money • When filing a claim with ASIFlex, expenses will be automatically applied to old year first, unless the participant requests otherwise • Reversals between plan years are allowed later, but a written request must be provided by the participant before the claims filing deadline

38. Enrollment • Online through ASIFlex’s website • www.asiflex.com/pebb • Select “Enrollment” • Or you can submit a paper enrollment form to ASIFlex • All enrollments must be completed by November 30th • You must re-enroll, even if you don’t want your deduction amount to change

39. Other Resources

40. Questions?