Final call: Flex benefits reimbursement deadline is February 29

The reimbursement request period for the 2011 plan year is quickly coming to a close. The deadline to submit reimbursement for your Section 125 spending account balance is Wednesday, February 29, at 5 p.m. C.T.

If circumstances prevent you from routing them in time, faxed copies (715-387-5400) are acceptable. Requests received after the deadline will not be accepted and processed.

For your convenience, your account balance is displayed on your check statement each pay period. The payroll statement also documents what has been deducted and reimbursed year-to-date.

Reminder: December 31, 2011 was the deadline to spend the money allocated for the 2011 plan/calendar year. Then, you have until 5 p.m. on the last weekday in February to submit reimbursement requests for expenses incurred during the previous plan year.

To receive reimbursement from your account, a FSA Reimbursement Request Form must be completed, itemized supporting documentation attached and forwarded to Human Resources (GC2). Additional reimbursement forms can be obtained under the Benefit Forms section of the Human Resources website.  

For a list of eligible expenses or other plan questions, refer to the plan handbook posted on the Clinic intranet or contact a Human Resources benefits representative at 1-8611. 
 

Retirement Investing 101: Using Roth 401(k) to lower taxes, increase retirement income

For several weeks this column has focused on how Roth 401(k) accounts can be used to manage income and taxes in retirement and why a person 30 years away from retirement might consider having such an account.

One more benefit of a Roth 401(k) involves how income tax is calculated on Social Security income. The formula adds together one half of Social Security income plus most other income to determine how much of Social Security income will be used in the calculation of federal income tax. Roth 401(k) income is not used in these formulas. It is not counted as income in the calculation of federal income tax, and it is not used in the formula to determine how much of Social Security is taxed. 

The fact that Roth income is not part of the formula to determine how much of Social Security income is taxed is a bonus. It means that if two people have identical incomes from Social Security and 401(k) savings, the one with the Roth account will pay less tax on her Social Security income.

A final way that a Roth account can be used to minimize taxes in retirement pertains to the type of investments that are contained in various accounts. If a retiree tried to limit withdrawals to amounts needed to maintain her standard of living, she would find that after age 70 she was required to withdraw more than she needed. A Roth 401(k) could be converted to a Roth IRA in order to avoid withdrawing more than needed.  However this may not reduce withdrawals enough. 

At Marshfield Clinic, about two thirds of participants' assets are in the Employee Retirement Plan. This limits participants' ability to control withdrawals.  However, by keeping the assets with greater growth potential in the Roth, it may be possible to increase the relative size of the Roth account. 

For example, a person with a total of $50,000 in the ERP and a Roth 401(k) who has an asset allocation of 60 percent stocks and 40 percent bonds might have all stocks in the Roth 401(k) and a mix of stocks and bonds in the ERP. The Roth would contain $16,500 in stock funds. The ERP would contain $13,500 in stock funds and $20,000 in bond funds.

Dan Horton, M.D.
former chairman
Retirement Plans
Board of Trustees

Over the long term, based on historical averages, the stock returns should be greater than the bond returns. Since the Roth account contains mostly stocks, it should grow faster than the ERP account which contains mostly bonds. Thus, when it comes time to convert the Roth 401(k) to a Roth IRA, a larger portion of the money will be protected from Minimum Required Distributions. The Roth account will have a bigger impact on withdrawals than it would have had if it had contained more bonds and grown more slowly. By keeping mostly stocks in the Roth and mostly bonds in the ERP, a retiree will have greater ability to control income and taxes.

To many, these issues seem much too far away to worry about, but making decisions in advance takes advantage of the opportunity when it is available.