Thursday, December 27, 2007

How your employer can save you money

If your company does not have a Flex Spending Account, you need to start you lobbying hard. If you have kids in day care or medical bills, lobby as though you work on Capitol Hill. Do not pass go, but you may collect $200.

I did this with my current company and it was not difficult to get them to agree. Why? It saves THEM money too. If your company doesn't have such a plan, let me give you the lowdown on how it help you and how it helps them.

How it helps you
Say you make $50,000 a year and get paid bi-weekly. With a Flex Spending Account (FSA) you can put $5,000 into your account for day care to be withdrawn as reimbursement by submitting forms with receipts for day care costs. I mean, really, we're not talking rocket science. The good thing for you is that the money comes out pre-tax. Mmmm hmmm. You see where I'm going with this.

For this scenario, I used one of my favorite tools in the whole world, the Yahoo Finance Salary Calculator. I assumed a 10% 401K contribution because you're smart like that. I also assumed you're married with 2 kids because you're such a catch! The before and after of your paycheck looks like this:

Net Pay = $1,439
Out of Pocket Day Care Cost For the Period Based on $5,000 a year = $192.30

Net Pay = $1,290
Out of Pocket Day Care Cost For the Period Based on $5,000 a year = $149.00

Your savings per paycheck = $43.70
Your savings for the year = $1,122.80

How it helps your employer
Also easy. The pre-tax contribution decreases the amount of money they need to pay in payroll taxes. My payroll company estimates a near 10% decrease. That is a good amount of money for companies. So they are adding a benefit, which is administered by the payroll company, and it saves them money and they get more satisfied employees. Such a win.

I get paid weekly and make $83K so my total savings are bigger. Using the calculator, I am going to save $33 a paycheck or a whopping $1,716 a year. I am so happy I could slap myself. Now go lobby. Now!


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naufal said...

Thanks a lot for thet!!