Q2

On January 1, 2022, Michelle, age 35, started a new job, and her new employer offers a healthcare flexible spending plan under which the employer contributes money to a flexible spending account (FSA) for use in paying for Michelle's eligible healthcare expenses. Michelle decided to have $2,500 of her earnings contributed to the healthcare FSA. In 2022, Michelle is in the 35% marginal tax bracket. What is Michelle's tax benefit (tax savings) as a result of her participation in the flexible spending plan? What happens to any funds remaining in the FSA at the end of the plan year? Assume the plan has no carryover or grace period. In addition, Michelle's employer also pays $550 /month to cover the premiums on Michelle's employer-sponsored accident and health plan. What amount of the premiums paid by the employer does Michelle include in gross income? What is the employer's incentive to offer such a plan? In 2022, Michelle fell and broke her arm. Michelle paid medical bills of $3,500 as a result, and Michelle's accident and health plan reimbursed Michelle for the entire $3,500. Is the $3,500 included in gross income? Michelle's employer provides free meals to all employees for breakfast and lunch. What factors would determine whether Michelle should include the value of the free meals in gross income