Flex Plan 1 Example

  • Gives employees flex credits before they elect benefits. The flex credits can be used to purchase benefits.

  • Creates one standard time record for each employee using the flex plan's flex pay code.

  • Reduces available flex credits when employees elect benefits.

  • Shows only the net gain from benefit elections on employee payments when an employee receives more flex credits than he or she has spent.

  • Uses flex company deductions to show spent flex credits on payments.

To create the first flex plan, ABC Foods assigned a flex pay code only to the flex plan. A flex company deduction is assigned to each benefit plan.

Employees in ABC Food's first flex plan can keep half of their unspent flex credits.

Creating flex credits for Employees

When ABC Foods runs BN145 (flex credits Calculation), the Benefits Administration application creates flex credits for each employee based on the flex credit and pretax parameters on BN08.1 (flex credits). BN145 creates flex credits for every employee in the flex plan.

Because employees can add half of their unspent flex credits to their payments (that is, the Unspent Taxable Dollars field on BN08.1 is 50.00), the Benefits Administration application creates a standard time record for each employee who receives flex credits. The Benefits Administration application creates the standard time record using the flex plan's flex pay code.

Enrolling Employees in Benefits

Benefits in this kind of flex plan all have positive premiums. When you enroll an employee in benefits, the Benefits Administration application spends flex credits first, then pretax dollars. When all flex and pretax dollars are spent, the Benefits Administration application spends after-tax dollars.

When an employee spends flex credits to pay for a benefit, the Benefits Administration application

  • Reduces the employee's available flex credits

  • Reduces the employee's standard time record (the standard time record is deleted when the employee uses all of his or her flex credits)

  • Creates a flex company deduction for the cost of the benefit

When all flex credits are spent and the employee uses pretax dollars to pay for a benefit, the Benefits Administration application

  • Reduces the employee's available pretax dollars and

  • Creates a pretax deduction for the employee for the cost of each benefit

When the employee has spent all of his or her pretax dollars and the application uses after-tax dollars to pay for a benefit, the application

  • Creates an after-tax deduction for the cost of the benefit

Example

Susan, an employee of ABC Foods, receives $1,000 flex credits and has a pretax limit of $5,000 which she can spend on benefits.

The Benefits Administration application creates a standard time record for Susan for $9.62 ($1,000 * 0.50/52).

If Susan did not elect any benefits, she would receive $9.62 each pay period.

Susan elects a health plan that costs $400. Because Susan has flex credits available, the Benefits Administration application

  • reduces Susan's available flex credits to $600 ($1,000 - 400),

  • Reduces Susan's standard time record to $5.77 ($600 * 0.50/52)

  • Creates a flex company deduction of $7.69 ($400/52) for the cost of the benefit

If Susan elects no more benefits, her taxable wages are $1,005.77 ($1,000 + 5.77), as shown on the payment below.

Wages Deductions
Regular $1,000.00 Health-flex company $7.69
flex credits 5.77
Totals $1,005.77
Taxable wages $1,005.77

Susan elects a disability benefit that costs $750.00. The Benefits Administration application

  • Reduces Susan's available flex credits to zero ($600 - 750)

  • Deletes Susan's standard time record

  • Creates a flex company deduction of $11.54 ($600/52) for the portion of the benefit's cost paid for with flex credits

  • Reduces her available pretax dollars to $4,850 ($5,000 - 150)

  • Creates a pretax deduction of $2.89 ($150/52) for the portion of the benefit's cost paid for with pretax dollars

Susan's taxable wages are $997.11 ($1,000 - 2.89), as shown on the payment below.

Wages Deductions
Regular pay $1,000.00 Health-flex company $7.69
Disability-flex company 11.54
Disability-pretax 2.89
Totals $1,000.00 $2.89
Taxable wages $997.11