All State employees are eligible to enroll each year in a flexible spending plan that allows the participants to pay for out-of-pocket medical expenses and the cost of dependent child care with “pre-taxed” dollars. Last month notices were sent from the State under its plan called Island Flex announcing an enrollment deadline of April 24th. That date has now been extended to May 30, 2009, and an announcement will be made to faculty members from the UH Human Resources Office in the next few days. See: http://hawaii.gov/hrd/main/EEBenefits/FamilyFriendly/IslandFlexPlan/
The reason for the State extending the deadline for enrollment is due to the uncertainty over the EUTF health insurance benefits and premiums. The EUTF is caught up in the Governor’s plan to reduce State spending in order to balance the State budget. The EUTF open enrollment will also be delayed since the employer trustees have not agreed to a new plan or benefits. The end result will likely be plans with higher premium costs and reduced benefits that shift the costs to individual participants. If this happens, public employees will likely profit from increasing the deductions from their salaries and having the funds placed in the Island Flex Plan where these additional expenses can be paid with “tax free” dollars. However, the IRS rules require you to determine at the beginning of the year the amount of money to place in the Flex Plan, but if those monies are not spent on medical or dependent care expenses they are not given back to the employee or carried over into the next plan year. This seems like a very punitive rule, but the tax code is the same for all such plans whether in the public or private sector. Therefore, the Flex Plan requires important information about your insurance coverage to determine how much money to set aside.
Increased premium payments by employees for health insurance through the EUTF can also be made with pre-tax dollars through the premium conversation option. This is separate and distinct from the Flex Plan. Once the EUTF premiums are known, you will be able to make your payments by selecting the premium conversation plan. You don’t need to allocate funds in the Flex Plan for the payment of health insurance premiums. The Flex Plan will only be used for medical expenses or deductibles not covered in the health insurance programs, e.g., medical, dental, vision, you select.