Tax Advantages of the Program

The Flexible Benefits program provides an opportunity for you to pay eligible health and dependent care expenses on a before-tax basis.

Advantages for Dependent Care Expenses
Under the Internal Revenue Code, you can obtain a tax advantage for dependent care expenses by paying for them with the tax-free dollars you put into your Dependent Care Reimbursement Account, or by claiming them as a tax credit on your federal income tax return forms.

You cannot use both methods for the same expenses. The amount you contribute to a Dependent Care Reimbursement Account will reduce, dollar-for-dollar, the amount you may claim as a tax credit. Consult a tax advisor for details.

If you pay federal income taxes, Social Security taxes, and Massachusetts state income taxes, the Dependent Care Reimbursement Account will generally be more advantageous than the federal dependent care tax credit, at any income level.

If you pay only federal income taxes and Social Security taxes we encourage you to talk to a tax advisor or an IRS representative to help you determine whether the Dependent Care Reimbursement Account or the federal dependent care tax credit is more advantageous to you.

Advantages for Health Care Expenses
The Health Care Reimbursement Account will be appropriate for you if you expect to have eligible uninsured medical expenses below 7% of your adjusted gross income in the coming calendar year. Expenses below this level are not deductible for federal income tax purposes. As a result, the Health Care Reimbursement Account may offer you an advantage that you cannot duplicate on your tax return.

Of course, your own tax situation will dictate exactly what the reimbursement accounts can do for you. For more specific information about how these reimbursement accounts may apply to you, we encourage you to talk to a tax advisor or an IRS representative.

Potential Impact on Your Social Security Income
Your participation in the Flexible Benefits Program will have the effect of reducing your Social Security taxable wages by the value of your designated salary reduction amount. This results in immediate tax savings to you. It could also serve to slightly reduce your future Social Security benefits.