THE UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL

MEMORANDUM
December 21, 1999
 

TO:	All Permanent University Employees Participating in the State Health Plan or HMO Options
FROM:	JoAnn Pitz, Benefits Director
SUBJECT:	Annual Enrollment for Flexible Benefit Plan (IRS Section 125) for the Comprehensive Major Medical Plan

It is time for you to make your annual election for calendar year 2000 regarding your participation in the "Flexible Benefit Plan" which allows any contributions you pay for your or your family's health benefit coverage to be deducted from your pay before Federal, State and FICA taxes are withheld. By participating you will be able to lower your taxable income and lower your tax liability in most instances. This effectively lowers the net cost of your health plan coverage. The "flexible Benefit Plan," in effect since 1987 and administered by the Teachers' and State Employees' Comprehensive Major Medical Plan, is separate and distinct from NC Flex, which is administered by the Office of State Personnel.

For example, if your earnings subject to Federal and State taxes are $24,000 and you have family coverage, your taxable income would be reduced by $3,662 (monthly contribution for family coverage of $305.14 times 12 months). This results in earnings subject to federal and State income taxes and FICA taxes of $20,338. While your actual tax savings will depend upon your specific tax rates, if a minimum Federal tax rate of 15%, a State tax rate of 7% and a FICA tax rate of 7.65% are assumed, tax savings of $1,086 are realized. This means your effective annual cost of health coverage for your family is $2,576 rather than $3,662.

• Your health benefit coverage and the payment of premiums on a before-tax or after-tax basis cannot be changed unless one of the following events occurs and you request the change within thirty days of the event:
• You change your legal marital status: marriage, divorce, death or spouse, legal separation or annulment.
• Your dependents change due to birth, adoption, placement for adoption or death of the dependent.
• You, your spouse, or your dependents terminate or commence employment.
• You, your spouse, or your dependents reduce or increase their hours of employment.
• Your dependents cease to satisfy the requirements for coverage due to attainment of age or student status.
• You, your spouse, or your dependents change place of residence Or work.
• You, your spouse, or your dependents are entitled to coverage under Part A or Part B of Medicare, or become eligible for Medicaid.
• You your spouse or your dependents commence or return from an unpaid leave of absence such as FMLA or military leave.
• You receive a court order to provide coverage for your child.