Background on FMS
What is FMS?
FMS is a participant-directed support. In other words, it is a tool to help program participants and their representatives to use participant-directed services. Additionally, it can provide protections and safeguards for both participants and program administrative agencies. FMS is the participant-directed support that ensures payments to participants' service providers are appropriately managed, tax and insurance compliance is maintained and program fiscal rules are upheld. Often FMS is provided in the program by an FMS provider, to which these duties are delegated.
What does an FMS provider do?
An FMS provider may have a variety of duties, depending on the structure of the participant direction program. Nearly all FMS providers make financial transactions on behalf of participants. This can include paying agencies or other goods and services vendors, or paying a participant’s workers. FMS providers also usually manage all tax, insurance and workers’ compensation responsibilities that are required in the course of paying workers on program participants’ behalf. Additionally, FMS providers are usually responsible for ensuring that participant expenditures meet the specific rules of the program. To help participants and Aging and Disability Network entities manage the program, most FMS providers generate regular reports for participants, counselors and program administrative agencies showing financial transactions, spending plan information, and other applicable information as the program requires.
Why does my program need an FMS provider?
For a participant, having directly hired workers and directing a budget requires more than selecting workers and vendors and choosing how to spend funds. Robust FMS allows participants to focus on directing and controlling their service, while leaving certain administrative duties to professionals with a particular expertise. FMS supports participants to get more out of their programs and helps to maintain regulatory compliance, a benefit to participants and program administrators.
The Internal Revenue Service (IRS) has determined that, in general, when individuals directly hire workers to perform personal care and other services (i.e., the individual does not contract with a company to provide these services), the workers are considered employees of the individuals who supervise and manage the work.
Like other employers, participants who directly hire their own workers must maintain compliance with employment rules and regulations to avoid penalties. In participant direction programs where state and federal funds are used for participant services, program administrators also have incentives to ensure compliance with state and federal rules and regulations is maintained. In
the 1990s, some participant-directed Medicaid programs were found to be out of compliance with IRS rules regarding payment of participant hired workers and the programs were fined (Flanagan, S. (2004). Consumer-directed attendant services: How states address tax, legal and quality assurance issues).
Early research in the Cash & Counseling program showed that, given the option, participants much prefer that someone other than them ensure taxes are paid, insurance is correct, workers are paid in compliance with regulations and spending is in accordance with the budget. In fact, when prospective program participants were asked if they wanted help or training with key fiscal and employer tasks including issuing payments, managing worker payroll, deciding worker pay, and performing worker background checks, the vast majority of participants (76%) across all age and disability groups wanted assistance.
FMS providers are not the same as traditional payroll companies!
It is important to note that FMS providers are not the same as traditional payroll companies. We will review this in more detail in the Fiscal/Employer Agent section.