The University offers a program of tax-saving flexible benefits. There are three parts to the Penn State Flexible Benefit Plan.
Contribution Conversion allows all faculty and staff to avoid federal, social security, Pennsylvania state and local income taxes on the money deducted from their salary to pay for their University provided health, dental, and vision benefits. Additionally the money used for the purchase of the first $50,000 of group life insurance is also free from those taxes. Employees are automatically enrolled in Contribution Conversion when they enroll in University benefits through ESSIC, the Employee Self Service Information Center .
In addition, faculty and staff may voluntarily participate in either or both of the following flexible spending accounts:
Regular full-time faculty or staff members may choose to enroll in the Health Care Flexible Spending Account (FSA) . This account allows a faculty or staff member to set aside funds on a pretax basis to cover anticipated out-of-pocket medical, dental, and vision care expenses for themselves and for their dependents.
Additionally, employees who have day care needs for their children or an adult dependent, may choose to contribute to the Dependent Day Care Flexible Spending Account (FSA) which creates a similar fund with pretax salary dollars to reimburse work-related day care expenses that are incurred for the care of eligible dependents. Unlike both Contribution Conversion and the Healthcare FSA, money contributed to the Dependent Day Care FSA is still subject to Pennsylvania state income tax.
Both the Health Care and the Dependent Day Care FSAs require employees to make a new election each year. Newly hired employees must elect FSA participation during the first 31 days of employment. All employees who wish to enroll during subsequent years or who wish to continue their participation in either or both of the FSAs must make an active election during the annual open enrollment period.
Each of the flexible spending accounts provides Penn State faculty and staff with an opportunity to effectively leverage their out-of-pocket health care and/or dependent day care expenses. Participation in the flexible spending accounts requires planning and a full understanding of how the accounts operate, the minimum and maximum contribution amounts as well as the issues involved with over or under estimating future expenses. To learn more about flexible spending accounts, you may review the Frequently Asked Flexible Benefits Questions or the Flexible Benefit Summary Plan Description.
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