MCS administers flexible compensation accounts (FSAs) for employers with 15 or more employees.  In addition to "Premium Only Plans", MCS also administers Health Care and Dependent Care Spending Accounts.

Health Care and Dependent Care Spending Accounts

MCS administers IRS qualified Section 125 Plans (sometimes known as Flexible Compensation) for employers.  These plans enable employees to take a salary reduction option, whereby certain eligible expenses may be paid for with pre-tax dollars rather than after-tax dollars.  Generally these eligible expenses include unreimbursed medical expenses or dependent care expenses incurred for care of the employee, his or her spouse and dependent(s).  For example, a Flexible Compensation Plan might be used to reimburse an employee medical expenses including deductibles, and co-payment as well as qualified day  care expenses.  Expenses for annual physicals and preventive care as well as dental, vision, and qualified over-the-counter medications also can be included.

For Section 125 Plans our services include:

• Web access for 24/7 account updates.

• A Powerpoint presentation for employees describing the benefits of Section 125.   

• A suggested plan document for review by employer counsel.

• Enrollment, claim, and change of status forms to be utilized for the administration of the plan. All forms are available electronically and can be tailored to employers specifications.

• Co-ordination of Section 125 benefits with your present employee benefit program.

• Suggested Summary Plan Description literature for employees.

• Personalized claims service including a toll free telephone number for direct contact with claims specialists.

• Interactive Voice Response system and Web access for 24 hours, 7 days per week account access.

• Participant claim direct deposit option.

• A quarterly status report mailed to the employer for distribution to employees.

• Management reports (also available through the MCS Web Site).

• Multiple account funding options are available as well as electronic payroll downloads.

• Continuing advice and assistance to the employer and employees to ensure the successful ongoing operation of The Plan.

Overview of the Flex Debit Card Option

The Flex Debit Card is designed to charge an employee’s FSA coverage directly while providing oversight capability by MCS.  An account is established for the employer, and a subaccount, indicating the amount of available coverage, is established for each plan participant.  Each participant is then issued a debit card (the “Card”).  The Card looks like a typical credit or debit card, and in fact is issued under the Visa or MasterCard system, but is only accepted at 23 types of merchant or provider locations as defined by merchant category codes (“MCCs”).  Visa, for example, has over 550 MCCs (e.g., one for restaurants, one for department stores, one for gas stations, one for dentists, etc.).  The Card is programmed to be accepted only at the 23 qualified merchant types relating directly to healthcare where eligible purchases can be made, such as hospitals, doctors, pharmacies, opticians, etc.  This limitation in and of itself substantially ensures that the Card will not be used for non-qualifying expenses.  The likelihood is that the overwhelming majority of expenses incurred from one of the 23 categories of merchants will be qualifying expenses under the FSA.  As is true elsewhere in our tax system, use of the Card involves voluntary compliance that is encouraged by a system of tax and employer-imposed penalties.  Plus, the plan administrators have the option to turn cards on or off from their location, when they deem appropriate.

Once a cardholder swipes the Card at an eligible merchant location, the system preliminarily screens the transaction.  It determines whether there are sufficient funds credited to the account, then the employer account, and finally the employee coverage amount.  Only if there is enough money credited to each of these accounts is the transaction approved.  It is at this point that the merchant will be paid from the employer’s “advance account.”  There is no direct payment or reimbursement to the participant.

To ensure that a particular transaction qualifies for pre-tax reimbursement, a hold is placed on the employee’s coverage amount until MCS deems the expense to be a permissible expense under Section 213 of the Code.  MCS will review the transaction amount, merchant type, merchant name and the date of the charge.  The plan benefit is treated as conditional (or, “paid but pending”) until MCS confirms that the services qualify for pre-tax payment by the employer.  MCS can either approve or deny the transaction.  In the event an eligibility determination is not possible, MCS has the option of “pending” the transaction and requesting more detail from the cardholder.