Benefits Bank Account

Employers whose plans include flexible spending accounts (FSAs) should establish a checking account in the bank of their choice to serve as a "benefits" bank account.

The purpose of this account is:

1. You will transfer FSA salary reductions withheld from employee participants into this account after each pay period.
2. We will process reimbursements (claims) payments and forward these benefit payments to your participants either as direct deposits or regular checks. These payments will be drawn against this account, based upon the signature authority you give us.

This account should simply be another regular corporate checking account for the employer, not a special trust account or even a specially designated account such as "Flexible Benefit Plan Account."

The reason is that we must avoid creating "plan assets," which in turn requires setting up a special trust and creates reporting requirements, a need for bonding, etc.

By making reimbursements from the general assets of the employer, we avoid creating plan assets and thus avoid further complexity and compliance requirements.

A regular corporate checking account set up in the name of the employer and perhaps designated "Account B" (as distinct from Account A, your primary operating account), is a general asset of the employer subject to the claims of creditors, yet established for the employer's convenience to facilitate an administrative arrangement for paying flex claims.

Further technical information can be found in this back issue of our newsletter, Flex Plan News.

Please see our Benefits Account Setup Form to arrange the opening of your account.

We strongly recommend our Direct Deposit reimbursement arrangement for our claims payments to your participants. This is not required (we can still mail regular checks), but is chosen by the vast majority of our plans and participants. Direct Deposit allows fast (weekly) turnaround of claims payments, paid directly to the employee's personal bank account.

Read more about Direct Deposit!

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