...continued from Vision Benefits Within Defined Contribution Plans

Cafeteria plans and Flexible Spending Accounts (FSAs) enable you to select vision benefits from a "menu" of options. You fund these types of plans by using your own pre-tax dollars.

Vision Benefits in Cafeteria Plans

A cafeteria plan is a defined contribution plan that allows your employer to offer you a menu of employee benefits in lieu of paying you a certain extra amount of cash salary (employer contribution). These employer contributions in lieu of salary then exactly match what you choose to pay to cover the employee benefits you select.

Because that amount of your cash salary never actually comes to you but is instead directly applied to your employee benefit plan, it is treated as tax-free income.

The menu of benefits associated with a cafeteria plan can include the following:

• health insurance
• dental benefits
• vision benefits
• long- and short-term disability benefits
• deposits to Flexible Spending Accounts (FSAs)

Added benefits to you are:

• reduced FICA (social security and Medicare) and federal, state, and local income taxes
• the freedom to choose from among a list of allowed benefits
• the ability to deposit pre-tax income into a Health Savings Account (HSA), provided your health insurance policy meets HSA criteria

Advantages to your employer include:

• reduced payroll taxes
• lower group insurance costs
  

Vision Benefits in Flexible Spending Accounts (FSAs)

With Flexible Spending Accounts, your employer:

• sponsors a menu of employee benefits, similar to those listed under the cafeteria plan, from which you can choose.
• deposits a certain amount of your pre-taxed salary (employer contribution) in a Flexible Savings Account (FSA) to reimburse certain allowed medical expenses. Under this plan, health insurance premiums and preventive care such as eye exams are excluded from reimbursement.

The amount of money deposited in an FSA account is determined by an agreement between you and your employer. The money in the account does not accrue interest.

If you do not use all the money in the account during the 12-month period, the money reverts back to your employer. In other words, you lose that amount of your salary.

If you spend more money on healthcare than is in the account, you pay the difference out-of-pocket with taxable dollars.

It is important, therefore, that the amount of salary you agree to have deposited in the FSA matches as closely as possible the amount you actually expect to spend out-of-pocket on medical expenses during the course of the 12 months.

Page 3 of 3: Details about Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs)

[Page updated October 2006]