Employee Matters

The Employee Compensation and Benefits Services staff prepares this column.

What is an Employee Reimbursement Account (ERA)?

ERA is a voluntary pre-tax benefit plan that allows eligible employees to earmark part of their salary to pay for medical expenses through a Medical Expense Account. It also allows eligible employees to have pre-tax deductions in a separate account for dependent-care expenses.

In addition, under the ERA program, certain benefit-plan premiums are automatically deducted on a pre-tax basis unless an employee waives having a pre-tax deduction. Examples of benefit plan premiums deducted as pre-tax are: health insurance, state group life insurance, excess dental, major medical, etc.

What types of expenses are allowable from a Medical Expense Account?
Allowable expenses include eyeglasses, contact lens and solutions, prescriptions, insurance co-payments and many over-the-counter drugs.

What types of expenses are allowable from a Dependent Care Account?
A Dependent Care Account allows for pre-tax deductions for dependent child, adult and elder care expenses to allow you and/or your spouse to work, actively look for work or attend school full time. Eligible expenses include costs of a qualified dependent-care facility or in-home location, before- and/or after-school care, local day-camp fees and pre-school and nursery school expenses.

How do the reimbursement accounts work?
Money is deducted from each of your biweekly or monthly paychecks on a pre-tax basis and placed in an account with Fringe Benefits Management Company (FBMC). When you have received the specific services or purchases, you submit the paid receipt to FBMC for reimbursement. For dependent-care expenses, the account must have the full amount available for reimbursement.

What is the benefit of pre-tax deductions?
All of your ERA contributions are taken out of your paycheck before federal and state income and Social Security taxes are calculated on your remaining salary. You keep more money in your pocket because you pay less in taxes.

Are there other advantages of ERA?
For an ERA Medical Account, you can spread out the contributions over a calendar year, but pay for the services or expenses before the annual contribution has been contributed.

How do I sign up?
The ERA program is based on calendar year expenses. Therefore, every fall there is an open- enrollment period. Coverage begins on Jan. 1 for employees who enrolled during the open- enrollment period. The 2005 Open Enrollment dates are Oct. 11-Nov. 19, 2004.

Newly hired employees must enroll within 30 days of date of hire, with coverage beginning on the date of the paycheck from which the first deduction is made.

What should I consider when choosing an amount?
There are calendar year minimum and maximum amounts for each account. The medical expense has a $100 minimum and a $7,500 maximum. If you elect a larger amount than you utilize for the calendar year, the remaining amount is forfeited.

The calendar year maximum for a Dependent Care Account is $5,000, with a minimum of $100.

You can obtain more information about Employee Reimbursement Accounts at the UW–Madison Benefits Fair held at Memorial Union on Wednesday, Oct. 13. More information

Questions?
Contact a Benefit Specialist at the EC&BS office via e-mail at employee@bussvc.wisc.edu or call 263-7556 or 262-5650.