Benefit options

Federal employees will soon be able to contribute to government-run flexible spending accounts (FSAs), which will allow them to direct funds toward specific benefits, using pre-tax dollars.

Open enrollment for the government's new Federal Flexible Benefits Plan (FedFlex), which will enable eligible employees to pay for benefits such as dependent care with pre-tax dollars, starts next month.

FedFlex will offer two FSA options:

* A health care FSA, through which employees can use pre-tax allotments to pay health care expenses that are not reimbursed by any other source and not claimed on the participant's income tax return. The actual amount an employee may set aside annually will be $3,000.

* A dependent care FSA, through which employees may use pre-tax allotments to pay for eligible dependent care expenses up to a maximum annual reimbursement of $5,000 ($2,500 if the employee is married and filing a separate income tax return).

Employees eligible for the Federal Employees Health Benefits (FEHB) program (even if not currently enrolled) will be able to elect a health care FSA to cover expenses not covered under their FEHB plan deductibles, coinsurance and co-payments, as well as services not generally covered such as dental care or orthodontics.

All federal employees (including employees with temporary, seasonal and intermittent appointments) will be able to elect to participate in the dependent care FSA for eligible dependents. Employees can elect to contribute up to $5,000 to their dependent care FSAs.

As with premium conversions, nonexecutive branch agencies may elect to adopt the amended FedFlex for their employees. Agencies that have already implemented their own FSAs may choose to adopt FedFlex FSAs for the plan year beginning January 1, 2004, or retain their own program. For now, annuitants (except re-employed annuitants) are not eligible for coverage in either FedFlex FSA.

Here are some other things you should know:

* The initial FSA plan year will begin July 1, 2003, and end Dec. 31, 2003. All subsequent plan years will run from Jan. 1 through Dec. 31.

* There will be an open enrollment period beginning in mid-May for the initial plan year that will run from July 1 through Dec. 31. Eligible employees can elect to participate in one or both FSAs and designate the amount of their annual contributions.

The benefit elections will be effective on the first day of the first payroll period that begins on or after July 1 and will terminate with the first pay period ending in January 2004.

After the initial plan year, employees will have an opportunity to make new FSA benefit elections during the FEHB open season. FSA benefit elections made during an FEHB open season will be effective with the first payroll period beginning after the following Dec. 31.

Zall is a retired federal employee who since 1987 has written the Bureaucratus column for Federal Computer Week. He can be reached at milt.zall@verizon.net.