The City offers flexible spending programs for dependent care costs, health costs that aren't covered by insurance, and health plan premiums.
The City's Flexible Spending Accounts Program is allowable under Section 125 of the Internal Revenue Code. The Health Care Flexible Spending Account (HCFSA) Program allows City employees to pay for eligible out-of-pocket health care expenses on a pre-tax basis, with deductions taken directly from salary. After enrolling in HCFSA, pay deductions are put into a special account that is used to cover the annual medical expenses up to a prescribed limit. Payroll deductions for HCFSA are shown in Box 14 of your W-2 Wage and Tax Statement.
DeCAP works the same way as HCFSA; deductions from the City employee's pay go to a special account to reimburse the employee for eligible dependent care expenses that may include care for young children or elderly dependents by a licensed caregiver. The advantage of DeCAP and HCFSA is that the pay deductions reduce gross income for federal income tax, Social Security, and Medicare tax purposes. The wage adjustments are reflected on the employee's W-2. Employees still pay state and local taxes on DeCAP contributions. Payroll deductions for DeCAP are shown in Box 14 and Box 10 of the W-2 Wage and Tax Statement.
Note: As a result of nondiscrimination testing for highly compensated employees, the City’s Dependent Care Assistance Program (DeCAP) Year 2021 goal amount is $5,000. However, federal law allows a maximum benefit of $10,500 in 2021. Employees should consult with a tax advisor regarding additional tax deductions on their federal tax return.
The MSC Program automatically increases take home pay to employees who have payroll deductions for health insurance premiums and optional riders, because these payments are not subject to federal or FICA taxes. Employees can opt out of the Program during the Health Benefits Transfer Period, generally from the end of September through November each year. Payroll deductions for MSC are shown in Box 14 of your W-2 Wage and Tax Statement.