With this feature, employees can contribute pretax dollars into an account that can ultimately reduce out-of-pocket costs for medical, dental, and vision expenses.
The standard transaction type for Flexible Spending Account [FSA] deductions have the pre-tax deduction code of 125FSA Reg. This means that the transaction type will deduct from the employee's pay pre-tax for taxes other than most State Unemployment Insurance [SUI] and State SUI Assessment taxes. However, it will only do so for the first $2,750.00 deducted. At that time, the deduction will stop for the employee. There will be no after-tax contributions.
This new transaction type will need to have its pre-tax deduction code set 125FSA Reg. This code is applied in Admin Tools > Transaction Type > Detail tab.
Create a Flexible Spending Account [FSA] Transaction Type
You will need to create a new transaction type to account for the FSA deductions that need to be taken pre-tax. To create this new transaction type:
- Open Admin Tools > Transaction Type > Detail.
- Click Add New.
- Name this transaction type "Flexible Spending Account" or something that will prompt your users to understand it is for FSA contributions.
- Set the Type field to Permanent.
- Set the Deduction Category to OtherHealthInsurance.
- The Pre-Tax Deduction code must be 125FSA Reg. This is the most important step!
- Select all the branches with which this deduction should be shared.
- Click Save.
With the employee's deduction set as outlined above, the FSA deduction will calculate on a pretax basis up to $2750.00 annual limit for 2020. Once that value is met, then the FSA deduction will stop.
For Support: The user story for this feature is here. There you can find more information, including Vertex Compliance Codes and acceptance criteria (a test case).