Flex credits and flex credit records
Flex credits are the amounts you give to your employees to purchase benefits. Employees then use these credits to purchase benefits.
When you define flex credits, the application creates a flex credit record that determines how flex credits are calculated. Flex credit records determine the percentage (if any) of unspent flex credits that is paid to employees as taxable wages, and the amount (if any) of regular pre-tax income that can be used to purchase benefits after all flex credits have been used. Flex credits may be calculated based on many variables, including salary, years of service, age, or number of dependents.
Before the beginning of each flex plan year, you define how flex credits are defined. You must create a flex credit record with a new effective date every plan year, since each flex credit record is only valid for 12 months.
Examples
| Scenario | Example |
|---|---|
| Flex credits (given before enrollment) that can be used to purchase other benefits with 80 percent of any unused credits received as taxable income. | John receives $1,500 flex credits before he chooses his benefits. He spends $1,200 to purchase benefits. Of the $300 remaining, he receives 80% or $240, as taxable wages. |
| Flex credits (given by election of benefit) that can be used to purchase other benefits with 100 percent of any unused credits taken as taxable income. | Tom is covered under his wife's health plan. Based on his election to waive coverage, he gets $500 flex credits to spend. He spends $400 of the flex credits to purchase family dental coverage and receives $100 as taxable wages. |
| Flex credits (given by election) that cannot be used to purchase other benefits with 100 percent going directly to taxable income. | Based on Sue's election to take single health coverage, she receives $100 flex credits. Sue also elects to take a supplemental life benefit that costs $200. Since she cannot apply her $100 in flex credits to the cost of the supplemental life, the $100 is added to her taxable wages and the $200 cost of supplemental life is deducted from her wages. |