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| FLEXIBLE SPENDING ACCOUNTS |
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| How
the Plan Works |
If you enroll in a Health Care and/or Dependent Care FSA, you decide
how much of your pay you want Valassis to set aside each pay period
and deposit in an account(s) set up in your name. Before you make this
decision, you should carefully estimate the amount of eligible expenses
you are likely to have during the year. IRS regulations require that
any money left in your account at the end of the year be forfeited,
so you should estimate carefully. You have from January 1st of each
plan year through March 15th of the following plan year to incur eligible
expenses and from January 1st of each plan year through April 30th of
the following plan year to submit eligible expenses to WageWorks for
reimbursement.
As you incur eligible expenses, you will be reimbursed from your account
with tax-free dollars.
Before-tax Contributions
You make your contributions with before-tax dollars; that is,
your contributions are deducted from your pay before federal, Social
Security and state income taxes are withheld. (Dependent Care FSA contributions
are taxed in Pennsylvania.) This reduces the amount of your salary that
is taxed, and you have more take-home pay.
There are annual limits on the amount you can contribute to each account:
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Dependent Care FSA—You may contribute from
$52 to $4,400 annually. If you are hired before 10/1 prior to the
plan year beginning, Valassis will match your contributions, dollar-for-dollar,
up to the first $600, for a total annual contribution of $5,000
a year if you are single and file as head of household or if you
are married and file a joint return. If you are married and file
separately, the combination of your contributions and Valassis’
matching contributions may not exceed $2,500 a year.
If either you or your spouse earns less than the above maximums,
then your maximum annual reimbursement would be limited to the amount
of your earned income or that of your spouse, whichever is less.
If your spouse has no earned income for a plan year, you cannot
use this account unless your spouse is disabled or a full-time student
for at least five months during the year.
The IRS requires that Valassis perform and pass certain tests for your
FSA benefits to be nontaxable. The amount that you elect to set aside
may have to be stopped or reduced for the plan to pass these tests.
If these limits apply to you, you will be notified.
Use-it-or-lose-it Rule
Since participating in an FSA provides tax advantages, the IRS requires
that you use all the money in your account for eligible expenses that
you and your dependents incur during each plan year. The plan year is
the same as the calendar year—January 1 through December 31. Valassis
has adopted a 2 1/2 month extension that allows you through March 15th
of the following plan year to incur expenses.
You have a grace period of 120 days (until April 30) after the end
of the plan year to submit claims for reimbursement for expenses incurred
during that year and the two and 1/2 month extension. Any money left
in your account after the end of the grace period will be forfeited.
This is called the “use-it-or-lose-it” rule.
If, for example, you direct $500 to your Health Care FSA and incur
eligible claims totaling only $450 by March 15 of the following year,
you will forfeit $50. Money that is forfeited is used toward the FSA
program’s administrative costs.
That’s why you should carefully estimate the amount of health
care and/or dependent care expenses you expect to have before you enroll
in a flexible spending account. However, even if you do forfeit some
of your flexible spending account balance, your tax savings may exceed
the forfeited amount. See the WageWorks
website for tools to help you estimate your expenses.
Important Note: The Limited Purpose Health Care FSA is not eligible
for the 2 1/2 month extension period.
No Interest or Withdrawals
Both the Health Care FSA and Dependent Care FSA let you pay for
eligible expenses with before-tax dollars. The money in your account,
however, does not earn interest.
Once contributions have been taken from your paycheck, they must be
credited to your spending account(s) and can be used only to reimburse
you for eligible expenses. You may withdraw deposited spending account
contributions only for eligible expenses.
No Transfer of Money Between Accounts
The IRS also requires that money directed to one account be used
for the purposes of that account only. If you participate in both a
Health Care FSA and a Dependent Care FSA, you may not transfer money
from one account to the other.
Effect of FSAs on Your Other Benefits
Your participation in the FSA program will not affect your company benefits
that are based on pay. These benefits will continue to be based on your
salary before any FSA contributions are deducted. But you should note
that because you do not pay Social Security taxes on your flexible spending
account contributions now, your future Social Security benefits may
be slightly reduced. For most people, however, the savings from participating
in an FSA are generally greater than any reduction in Social Security
benefits that might result.
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Summary
Plan Description
The legal summary of this benefit will be included in the
2008 Benefits Handbook.
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