PA STATE SYSTEM OF HIGHER EDUCATION

1. PA STATE SYSTEM OF HIGHER EDUCATION OPEN ENROLLMENT FLEXIBLE SPENDING ACCOUNTS AND HEALTH CARE PLANS FALL 2004

2. Open Enrollment Dates • Flexible Spending Accounts • October 25 – November 5 • State System Group Health Program • October 25 – November 5 • PEBTF Health Care • October 25 – November 12

3. All open enrollment changes are effective January 1, 2005

4. PA STATE SYSTEM OFHIGHER EDUCATION FLEXIBLE SPENDING ACCOUNTS OPEN ENROLLMENT

5. Section 125 Plan Flexible Spending Account Premium Conversion Plan Medical Reimbursement Account Dependent Care Reimbursement Account

6. Contributions to Flexible Spending Accounts Are Pre-tax Taxes Taxes Taxes Tax elimination – not tax deferral

7. MedicalReimbursementAccount • Employees designate amounts to be deducted from pay to cover out-of-pocket medical expenses for self and dependents • $3,000 annual maximum

8. MedicalReimbursementAccount Savings • Federal - 15% - 30% • State – 3.07% • Local – % varies (except Philadelphia City) • FICA (Social Security) - 7.65%

9. MedicalReimbursementAccount Dependent Definition • All family members whose health care expenses can be deducted on Federal income tax returns

10. Eligible Medical Expenses • Major Medical deductibles • PPO/HMO office visit co-pays • Prescription co-pays and deductibles • Dental/vision expenses • Lasik eye surgery • Many over-the-counter items

11. Ineligible Medical Expenses • Expenses not allowed on income tax return • Cosmetic surgery • Expenses paid through other sources • Insurance premiums

12. Dependent Care Reimbursement Account • Employees designate amounts to be deducted from pay to cover dependent care expenses • $5,000 annual maximum

13. Dependent Care ReimbursementAccount Savings • Federal - 15% - 30% • FICA (Social Security) - 7.65%

14. Dependent Care ReimbursementAccount Dependent CareReimbursementAccount Dependent Definition • Dependent under age 13 who qualifies as a dependent for Federal income tax purposes • Spouse or other individual unable to care for self who qualifies as a dependent for Federal income tax purposes

15. Eligible Dependent Expenses • Child care centers with 6+ children (must be IRS qualified) • Caregivers for disabled spouse or dependent living with employee • Babysitters • Nursery Schools

16. Ineligible Dependent Expenses • Babysitting for social events • Charges for overnight camp • Educational expenses (kindergarten and beyond) • Expenses taken as child care credit on income tax return

17. Employee Estimates Annual Expenses Eligible Expenses Reimbursed Through Biweekly Paycheck Equal Amounts Deducted From Paychecks How It Works Expenses Reviewed for Eligibility Employee/ Dependent Incur Expenses Employee Files Claim for Reimbursement

18. FSA Enrollment • Annual enrollment periods • Changes to elections only if “Status Changes” defined by IRS • Must re-enroll each year to stay in medical/dependent care accounts

19. Plan Year January 1 - December 31 Claims incurred through December 31 must be submitted for reimbursement by March 31 of the following plan year

20. All claims processed in Harrisburg for confidentiality purposes

21. Funds not spent through reimbursement accounts are forfeited and used to fund plan administration Estimate Expenses Carefully!!!

22. PremiumConversionPlan Employees’ health care contributions are paid pre-tax

23. PremiumConversionPlan Savings • Federal - 15% - 30% • State – 3.07% • Local – % varies(except Philadelphia City) • FICA (Social Security) - 7.65%

24. PremiumConversionPlan • Employees elect when enrolling in health care plan • Pre-tax treatment continues unless employee changes option