I was working through my benefit selection page and checked my NBS account to see if there was any money left over from the past year. The numbers didn’t match the form I submitted last year and my paycheck amounts are higher than they should be. And then, I looked from the last year and I put extra money into the account, but didn’t spend it. How can I get my money back? Why is MiraCosta trying to take my hard-earned money?
Without my money, I’m so lonesome I could could cry.
You have some great questions so we’ll see if we can get past that cheatin’ heart. Let’s deal with them one by one.
How Voluntary Benefits Are Deducted
First, our benefits are annual whether your job is paid over 10-months, 11-months, or 12-months. For payroll to process everything differently would be extremely hectic and could lead to errors. So at the bottom of the “My Benefits” process is step 5 with the following comments:
This election form revokes any prior election form completed. Participation in these plans will automatically cease upon termination of employment unless eligible for early retirement or COBRA benefits. I authorize payment of premiums for coverage selected above which exceeds benefit elections paid by the District. Such amount(s) shall be deducted from my paycheck over a 10 month period, August - May.
What does this last sentence mean? Here’s an example of someone who used all the district voluntary benefits on selected benefits, and then chose to put additional dollars into the Health Care Flex Account or Dependent Day Care Flex account. Let’s say that all the benefits cost an additional $75 per month. If these were deducted each month, it would show $75 each month in the box for “Before Tax Deductions.” This is not how it works at MiraCosta since they are deducted over 10 months, not 12. The $75 per month would be a total of $900 out of pocket over the year, and when you divide by 10, this becomes $900/10 = $90/month. So for ten months, you’ll pay $90 each month and for two months, you’ll pay nothing! In the end, it will cost you the same but it may look different than you anticipated.
You can always check on the NBS website (https://www.nbsbenefits.com/) to see your annual contribution amount and confirm it matches what you’ve submitted on your official form.
NOTE: One thing that a few people have complained about is that they end up not using all the money and it didn’t go into their Health Care Flex Account. To avoid having this issue, check the line at the bottom where it says “District Allowance Remaining.” If you end up with $0.00/month on that line, you’ll know that you have allocated all the district voluntary benefit dollars. If there is money left on this line, the district will use it to offset future benefit cost increases.
What Happens to Unused Voluntary Benefit Dollars?
Lastly, the amount that you end up paying into your Flex Accounts (Health Care or Dependent Day Care) that is unused does go back to the district at the end of the year. This includes both district dollars and individual dollars. So if you thought you needed the money and end up not using it, you could get another set of prescription sunglasses! Or, if you don’t use it, the funds will go forward to offset future benefit cost increases. For many years, the amount of money left over in these accounts is over $150,000! If you don’t need the money, it does help us maintain great benefits as costs go up.
The Tax Benefit Explained
That tax benefit is pretty important to many people. When you decide to put in the additional money for extra expenses, you do get a benefit as the money comes out pre-tax. If you were in the 25% federal marginal tax bracket and 8% state bracket, then your effective tax rate would be about 33%. By putting in $900 “before tax,” you avoid paying tax on the money entirely and all $900 could go to paying medical expenses. If you had been taxed on the money, then 33% of your $900, or around $300, would go to taxes. Paying with after tax dollars means that you’d only have $600 to pay medical expenses. For many people, that’s a big difference and a good reason to contribute additional dollars out of pocket. NOTE: the maximum for Health Care Flex is now $2,600 per year, and Dependent Day Care Flex is $5,000 per year. Both are pre-tax amounts.
Make those selections with good information as you go forward and you won’t have any trouble!