A limited purpose flexible spending account (LPFSA) allows eligible employees to set aside pre-tax money via payroll deductions into a tax-free account and use this money to pay for eligible out of pocket Dental and Vision expenses.
Zenefits offers two types of FSAs:
Zenefits does not support varying maximum LPFSAcontribution limits for different workers. Everyone who enrolls in an LPFSA in Zenefits can contribute up to the IRS limits for Health Care (see limits) or Dependent Care (see limits) FSAs. Outside of Zenefits, employers may set a limit lower than the statutory limits. However, setting a different limit for different classifications of workers can be an issue. Reasonable classifications may be permissible, including, but not limited to:
After your first monthly payment (which is based on the number of employees who actually enroll at the plan's start), your subsequent monthly payments are based on the maximum number of employees enrolled on the plan at any time in the year. If additional employees enroll later in the year, the number of seats increases, and Zenefits charges for each additional seat.
Choose the Carryover option during plan setup to allow your employees to roll over some of their LPFSA funds that remain after the runout period when they renew their plan. You can choose this amount, up to a limit of $550 (for 2020). Carryover amounts don't count toward the next year's annual contribution limit.
This option does not apply to Dependent Care FSAs.
How much you choose to contribute to your employees' LPFSAs is up to you, but here are some things to consider when you're making the decision.
If you use Zenefits Pay Connect with your payroll, do the following before your LPFSA plan starts:
If you use Zenefits Payroll or Pay Connect Checklist (Reports), you're all set!
You can match employee's Limited Purpose FSA contributions from $0 up to the maximum of $2750 (2020 annual limit). Since you can't predict ahead of time what employees elect, if any individual employee sets contribution amounts less than yours, Zenefits simply reduces your contribution to match theirs.
If the LPFSA is a shortened plan year then the maximum contribution and matching amount will be prorated. So if the company is enrolled in the LPFSA effective 7/1 through 12 /31, the employee would only be able to contribute half of the maximum amount, which would be $1375 for 2020. This would then be the maximum that the employer is able to match.
Complete setup by the 15th of the month prior to your chosen start date. This lead time gives your employees a minimum of 10 days to decide whether to enroll.
If you complete the setup after the 15th, the earliest your plan can start is the 1st of the month after next so that your employees still have at least 10 days to decide.
Once the company plan is set up, individual workers will need to complete enrollment by the 25th to start on the 1st of the next month. Anyone who misses the deadline will not be able to enroll until the next renewal, unless they have a qualifying life event.
Keep in mind that enrollees won't be able use the LPFSA funds until after their plans start, or get reimbursed for purchases made prior to the start of their plans.
As an employer, your monthly costs are based on the number of "seats", which is the maximum number of employees who were enrolled at any time.
If employees who were enrolled leave your company (and cancel their FSAs), Zenefits won't refund you for those employees. However, for every seat vacated by an employee, another employee can enroll at no additional cost to you.
The start date you choose can also determine when the plan renews:
If you choose the Calendar Plan Year option, your LPFSA plan year will be different from your contract's term, and you'll be charged the annual fee twice: once at the start of the Calendar Plan Year, and again when the plan renews in January.
The company will lose the unpaid funds by the employee. This also works the other way. Employees who leave a company prior to spending their LPFSA funds will have 90 days to submit claims for any expenses incurred prior to leaving the company. After the 90 day period to submit claims any unused funds will be returned to the company.
To start a new company LPFSA plan at the same time as your insurance, complete plan setup in Zenefits before the 15th of the month prior to your insurance plan's effective date, and choose that effective date as the LPFSA start date.
Otherwise, simply choose a 1st of the month start date as you like, and enroll by the 15th of the month prior to that date. If you're looking to carryover an existing LPFSA plan to Zenefits, see these instructions.
Here's how to choose the right LPFSA contract:
1. To save money, choose the Annual Contract and lock in a lower monthly cost of $4 per employee and a minimum monthly cost of $20. You'll prepay the plan's annual and minimum monthly fees at the start of the plan year.
2. For more flexibility, choose the Month-to-Month Contract for pay-as-you go monthly billing, but a higher monthly cost of $5 per employee and a minimum monthly cost of $25.