What Is the VitaFlex Flexible Spending Account (FSA) Plan?
The VitaFlex Flexible Spending Account (FSA) Plan is an employee benefit Plan that allows you the
opportunity to reduce your taxable income. With this Plan, you may pay for certain medical and
dependent care expenses with pre-tax dollars. Your employer has arranged this Plan so that you can
take advantage of these tax savings. These Plans are sometimes known as Section 125 Cafeteria
Plans, since Section 125 of the Internal Revenue Code authorizes and governs them.
What Does Pre-Tax Mean?
Pre-tax means your gross pay before income taxes and Social Security taxes are taken out. Paying
with pre-tax dollars means the dollars that you would have paid in taxes are redirected and used to
help pay your eligible medical or dependent care expenses. In other words, you do not have to pay
taxes on the money spent for eligible expenses. Federal income taxes, State income taxes (in most
states) and Social Security taxes are all avoided under this pre-tax plan.
How Does the Plan Work?
First, you must accurately estimate your eligible medical and dependent care expenses for the Plan
Year. Then, elect that amount of money to allocate into your Medical Reimbursement Account and/or
your Dependent Care Reimbursement Account. Your compensation is reduced by this amount via
salary reductions and these funds are allocated into separate accounts. Once you incur an eligible
expense, you submit the claim and you are reimbursed for the expense from your account balance on
a tax-free basis.
Why Should I Participate?
You can elect the exact level of benefits that will equal your personal needs.
Your take-home pay or annual spendable income may increase.
You can redirect your medical and dependent care expenses to pre-tax dollars, eliminating
federal, state, and Social Security taxes.
Every dollar paid on a pre-tax basis results in tax savings to you.
How Does the FSA Plan Increase My Take-Home Pay?
When you participate in the VitaFlex Flexible Spending Account Plan sponsored by your employer,
you redirect your expected medical and dependent care expenses so that they are paid with pre-tax
dollars. You lower your taxable income and therefore reduce your annual taxes. Ultimately, this
means that you will have more money in your paycheck.
Example of Tax Savings
The example below shows the savings potential for someone earning $60,000 per year with $1,200 of
budgeted medical expenses, $4,200 of budgeted dependent care expenses, and $1,080 of annual
premium contributions. An annual tax savings of $1,860* is available, just by participating in the
VitaFlex Reimbursement Plan. The higher your tax bracket, the more you can potentially save by
participating in the plan.
Without VitaFlex
With VitaFlex
Monthly Salary
$5,000
$5,000
Actual Expenses — Funded Pre-Tax
Medical
$ 0
$ 100
Dependent Care
$ 0
$ 350
Premium Contributions
$ 0
$ 90
Income Before Taxes
$5,000
$4,460
Taxes (Marginal Bracket)*
Federal Income Tax (25%)
$1,250
$1,115
CA State Income Tax (9%)
$ 450
$ 402
Social Security Tax (7.65%)
$ 383
$ 342
Income After Taxes
$2,917
$2,601
Actual Expenses - Funded After Tax
Medical
$ 100
$ 0
Dependent Care
$ 350
$ 0
Premium Contributions
$ 90
$ 0
Take Home Pay
$2,477
$2,601
Net Pay Increase (Monthly)
$ 224
Net pay Increase (Annual)
$2,688
*Assumes a married California taxpayer with 3 exemptions.
Calculate Your Tax Savings
Use the worksheets on page 12 of this Guide or
Use the VitaFlex interactive Tax Savings Calculator on the VitaFlex website at www.vitaflex.net. Click on "Tax Savings Calculator." The password is "vitaflex."
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