Tax Saver Benefit (TSB) Plan

The TSB plan is designed to save tax dollars when a participant pays for certain IRS-eligible expenses. When salary contributions are made into one or both TSB expense reimbursement accounts, the contributions are not subject to federal, state, local, or FICA taxes. This results in substantial savings to the employee. Full-time employees may elect to participate in either or both of these accounts:

• Health Care Reimbursement Account - for health care expenses incurred by the employee or the employee’s eligible tax dependents (if expenses are not eligible for health plan reimbursement)
• Dependent Care Reimbursement Account - for child or elder day care (not health care) expenses that allow the employee to work

The TSB expense reimbursement accounts are administered by The Nyhart Company.

Enhancements

1. New logon for online account information
Nyhart makes online account information available to employees through their Web site, www.nyhart.biz. A Social Security number will no longer be required to log on—instead, IU employee identification numbers will be used to access information about claim payments and account bal­ances.

2. Additional TSB debit cards
Employees may now obtain additional debit cards, at $5.00 a card, for use by family members. Cards can be ordered using the form at www.Nyhart.biz or by calling Nyhart at 800-284-8412. When giving cards to family members, remember the employee is responsible for substantiating purchases on all cards, as requested by Nyhart.

New IRS Regulations for Dependent Care Reimbursement Accounts

The IRS recently provided new regulations about dependent care reimbursement accounts such as those in the IU Tax Saver Benefit Plan. These accounts allow employees to pay up to $5,000 in employment-related dependent care expenses per year using pretax dollars. The new regulations only formalize earlier IRS guidance, so they should not be new to current participants in the IU TSB plan; however, below is a reminder about how the IRS defines qualifying expenses and dependents:

• Qualified expenses are employment-related if they are necessary to enable a person to work or actively seek work. Work can be full- or part-time, but volunteer work or work for nominal consideration does not count. For married employees, the employment rule applies to both employees and their spouses. Spouses are treated as working if they are full-time students or are physically or men­tally unable to care for themselves.
• Besides serving a work-related purpose, a dependent care reimbursement expense must be for the care of a qualifying individual under IRS Code. This includes an employee’s dependents under age 13 or a spouse or dependent of any age who is physically or mentally incapable of self-care and who has the same principal residence as the employee for at least half of the year.
• Qualified expenses permit fees for specialized day camps (e.g., computer or art programs) if they allow the employee to work, but exclude costs for educational programs at the kindergarten level and above.
• Dependent care expenses incurred while an employee is absent from work are eligible only if the absence is short (e.g., a minor illness or a week-long vacation) and care is paid on a weekly or longer basis.

Questions about the eligibility of specific, day care-related expenses, should be directed to Nyhart, the TSB plan administrator, or a tax advisor.

Account Balances and Claims
Each year, employees can use any remaining health reimbursement account balances to pay for qualified expenses incurred in January and February of the following year. This ‘grace period’ applies to paper claims only, not to those claims processed under the optional TSB debit card.  (Purchases made in 2007 using the IU TSB debit card will be paid from the employee’s 2007 reimbursement account.)
Employees must clearly indicate on a claim form if they want January/February 2007 expenses to be reimbursed from their 2006 account. Once a claim is submitted, the account year cannot be changed.

The deadline for submitting claims to Nyhart is April 15.

TSB Card Option

The TSB card is a debit-type
MasterCard that allows participants
to pay for purchases and services from their TSB health care reimbursement account. The card may be used at any physician’s office, hospital, or service provider that accepts MasterCard—including grocery and discount stores—for eligible expenses only. The card does not apply to the TSB Dependent Care Reimbursement Account.

The card is voluntary and only issued upon request to those who do not already have one. Requests must be made between December 22 and January 12 using the www.Nyhart.biz Web page. Participants who obtained cards in 2005 or 2006 may continue to use them for expenses in 2007—a new card is not needed. The TSB card is effective for three years.

Detailed information is at www.indiana.edu/~uhrs/benefits/tsb.html and will also appear in the Open Enrollment packet mailed in early November.

Retirement Plan Misconceptions

Rumors and misconceptions about IU-sponsored retirement plans can cause people to make misinformed and costly decisions. The following are a few examples of common rumors and misconceptions. Future issues of this bulletin will include additional examples.

Participants with plan accounts invested at TIAA-CREF may only take a distribution in the form of an annuity upon retirement or termination of employment.

False.  A wide variety of distribution options are available for accounts invested at TIAA-CREF, including single-sum distributions, installments, annuities, etc.

There is only one benefit under PERF, the annuity savings account.

False. PERF has two separate and distinct benefits, a pension benefit and an annuity savings account benefit. The pension benefit is very often the largest benefit under PERF. The full (unreduced) pension benefit is an annual benefit payable for life that is based on the following formula:
Years of PERF creditable service X final average salary X 1.1% = annual benefit for life.

Final average salary refers to a participant’s highest five years of compensation in a PERF-covered position. Participants must have at least 10 years of PERF creditable service to have a vested right to the pension benefit.

Participants must take a distribution of their plan accounts when they terminate employment with Indiana University.

False. Plan participants generally have three options for their plan accounts when they leave Indiana University:

• Leave accumulations in the plan account and continue to manage investments;
• Withdraw all or a portion of plan account accumulations;
• Convert all or a portion of plan accumulations to lifetime annuity payments; or
• Roll over all or a portion of plan account accumulations to an eligible retirement plan (e.g., IRA).

Next article: Highlights of 2007 Changes