CCP 12-13-2004 - Laserfiche WebLink

Home Browse Search

. . . CilV of Arden Hills Summary Plan Description income for that year. If you are married, your income limitation is the lower of (a) your earned income for the year, or (b) your spouse's earned income for the year. If your spouse is a full-time student or is physically or mentally incapable of caring for himself or herself during the year, your spouse will be considered to have earned income of $250 per month if you have one Dependent who qualifies for coverage or $500 per month if you have two or more Dependents who qualify for coverage. However, to sustain the nontaxable status of dependent care benefits you receive from the Plan, you will be required to report the amount of those rein1bursements and the name, address, and social security number or employer identification number of the dependent care provider on your federal income tax return. By each January 31, as part of your W-2, the Employer will provide you with a statement showing the amount of dependent care reimbursement paid to you during the preceding calendar year so that you can calculate the amount, if any, that was taxable. This statement may be a part of your W-2. The Employer will not withhold income taxes or social security taxes from dependent care benefit payments. To illustrate the tax savings offered by the Plan, suppose Terry expects to be paid a gross salary of $35,000 during the year. If Terry has two children and expects to have $1000 in health care expenses that will not be covered by insurance or any other health care plan and $2500 in dependent care expenses. Terry may pay these expenses on an after-tax basis from her salary or, by participating in the Plan, she can receive benefits from the Plan which allow hcr to pay the expenses with pre-tax dollars. The difference is illustrated in the following table. (For illustration purposes it is assumed that Terry pays $1.00 for each $1.00 of health care reimbursement coverage during the Plan Year and she is in the 30% tax bracket.) Sample Paycheck Comparison Without Plan With Piau Annual earnin s Health care expenseslDependent care expenses paid throu h the Plan Taxable com ensation Estimatcd Federal Tax Withholdin Social Security and Medicare (FlCA) Tax (7.65%) $35,000.00 -3,500.00 $35 000.00 c 10,500.00 $31 500.00 -9,450.00 -2,410.00 $19 640.00 -0 After-tax com ensation Health care expenseslDependent care expenses paid after-tax S end able income after taxes and ex enses $18322.00 $19 640.00 Terry's total gross compensation, considering both gross salary and Plan benefits, will have stayed the same, but her compensation after federal taxes, health care expenses, and dependent care expenses will have increased by $1,318.00. The full or partial non-taxability of benefits is the primary benefit of the Plan. However, the exact effect the Plan will have on you will depend on the benefits you elect as well as other factors that affect the amount of income taxes you pay. SPD-l1