HomeMy WebLinkAbout6.b. Transfer for Flexible Spending Account ProgramCITY OF ROSEMOUNT
EXECUTIVE SUMMARY FOR ACTION
CITY COUNCIL MEETING DATE: JANUARY 15, 1991
AGENDA ITEM:
TRANSFER -FLEXIBLE SPENDING ACCOUNT
AGENDA SECTION:
NEW BUSINESS
PREPARED BY:
AGENDA
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STEPHAN JILK, CITY ADMINISTRATOR
i 6B
ATTACHMENTS:
APP VED BY:
MEMO FROM JEFF MAY, FINANCE DEPT.
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We are into our second year for our flexible spending account/ program for
our employees. This program allows pre-tax withholding of monies from
employee wages for medical and child care expenses.
This program saves employees, who take part, many state and federal tax
dollars by allowing them to have to claim not just a portion of these
expenses on tax returns but all of them by getting the money before it is
taxed.
This year the new federal law requires that the employer set aside a .
sufficient amount of dollars to cover all claimed expenses through the plan
year. The attached memo from Jeff May explains the results of that ruling.
I recommend we transfer the amount necessary to cover potential claims as
indicated in Jeff's memo.
RECOMMENDED ACTION:
Adopt a motion to transfer $9582.90 from General Fund to the Flexible
Spending Account on a temporary basis to be paid back through employee
withholdings.
COUNCIL ACTION:
Approved.
DATE: December 31, 1990
TO: Steve Jilk, Administrator
FROM: Jeffrey May, Deputy Finance Director
SUBJECT: Flex plan Deposits/Withdrawals
Due to the IRS ruling allowing participants to receive their
Health Care reimbursements prior to actually putting the
money into their account, our flex checking account is
constantly subject to the possibility of becoming overdrawn.
This became a reality when we received our December flex
checks' Dean Johnson, a participant in the plan,
had in
October or November submitted a bill for $900, and been
reimbursed the whole $900 even though he had put in only $100
or so to that point. The December reimbursements had left
our flex checking account with a ($130.63) balance. Our
December 27, 1990 flex deposit took care of that negative
balance, but their is a good chance of a deficit in the
account every month.
At your request, I figured out how much we would need to
"borrow" from the General Fund in order to fund the flex
account from February 1, 1991, through the end of the flex
plan year, September 30, 1991. This amount would be
$9,582.90. Then, as payrolls occurred, the withholdings
would be paid back to the General Fund, rather than being
deposited into the flex checking account. The General Fund
would lose some interest revenues, but the potential problems
that would be eliminated with the flex checking account,
would more than offset the nominal loss of interest revenue.
Please advise me as soon as possible if this is the direction
that we want to take. Thank you.
cc: Don Darling, Finance Director
Sue Johnson, City Clerk