Nest egg

Officials from the Office of Personnel Management and SHPS Inc., a benefits administration company, sat down last week with federal payroll providers to discuss plans and set target dates for offering the newest benefit to federal employees, flexible spending accounts.

SHPS, based in Louisville, Ky., was awarded a contract on March 14 to handle the accounts for the federal government. With flexible spending accounts, employees will be able to put aside up to $3,000 for medical expenses and up to $5,000 to pay dependent care costs for children up to age 13, or an adult who qualifies as a dependent based on IRS regulations.

"[Agencies] need to make sure they have the system to handle the actual payroll deductions for healthcare and dependent care FSAs," said Jerry Oehm, director of business development for SHPS. "They need to have their systems programmed to handle taking money out on a pre-tax basis … some of them are ready and for some of them this is brand new."

Employees can use the accounts to set aside insurance deductibles and co-payments, as well as to pay for many medical expenses not covered by their health insurance plans, such as:

• abortion
  
• acupuncture
  
• treatment for alcoholism
  
• ambulance service
  
• artificial limbs
  
• artificial teeth
  
• birth control pills
  
• books and magazines in Braille
  
• medical care by a chiropractor
  
• treatment by a Christian Science practitioner
  
• crutches
  
• dental treatment, including X-rays, fillings, braces, extractions and dentures
  
• drug addiction treatment
  
• eyeglasses
  
• fertility enhancement
  
• guide dogs
  
• hearing aids
  
• co-payments and deductibles for insurance-covered care
  
• insulin and prescribed drugs not covered by standard insurance
  
• psychiatric care
  
• smoking cessation programs
  
• vasectomies
  
• weight-loss programs at physician's direction
  
• wheelchairs
  
• X-ray fees

The expenses covered in the federal government's program may be different, since some of those services may already be covered by standard health insurance.

With FSAs, employees pay for services up front and then submit receipts to their employers, who then reimburse them from the flexible spending accounts. To simplify the process for federal agencies, SHPS will collect the deducted money and pay out the reimbursements-something the company doesn't generally do, Oehm said.

There is a "use-it-or-lose-it" element to FSAs. Employees will have to forfeit any money they don't use in a calendar year. Rep. Jim DeMint, R-S.C., has introduced legislation that would allow employees to rollover as much as $500 into the next year.

Because federal agencies are unable to offset program administration costs as some private companies are able to do, federal employees will have to foot the bill for those costs, but Oehm said his company "worked very hard with OPM to make that the most modest of costs."

"The fees will decrease with participation until we hit a certain level and then it's a stable fee structure," Oehm said.

SHPS will make money by charging the federal government a fee for each participant. According to Oehm, about 10 to 20 percent of the eligible federal workforce will likely sign up to participate during the program's first year.

An OPM spokesman said Tuesday that open season for enrolling in the program is scheduled for May and the program should officially kick off in July. Oehm said some agencies might not go online with the system until January 2004.