Today, more than ever it is important to be creative and utilize every tool at your disposal when developing an employee benefit package that will be cost effective and employee friendly. With increasing government regulations (Obamacare) and increasing insurance premiums, it is imperative when developing a comprehensive employee benefit package that understands the implications to both the employer and the employee. There are many programs available and when used to their fullest can save the company premium dollars and provide programs that are beneficial to the employees.

Many employers and employees are sharing the monthly premium cost of their benefits as well as utilizing group and voluntary program arrangements in order maintain their programs.

 

 

Health Insurance

Employer provided health plans are in a constant state of flux. These programs are driven by changing government regulation, increasing provider cost (doctors, hospitals, etc.), and changing coverage options. It has become increasingly important to review these plans each year and when necessary adjust the benefits, consider employee contribution and/or offer a partially or fully voluntary program.

Prescription Drug

The prescription drug portion of a health insurance program has become a larger component of the plan over the years. Considerations should be made regarding co-pays for generic or name brand drugs both formulary and non-formulary, initial deductable or none, etc. This portion can represent up to 30% of the total health care premium.

Dental Insurance

Dental benefits are an optional benefit in most HMO programs and are also offered as a stand-alone program through insurance companies that specialize in providing dental coverage. These programs can also be offered through the employer as a voluntary benefit with minimum participation.

Life Insurance

Employer sponsored life insurance can provide a low cost employee benefit option for the private employer similar to that offered through larger corporation and government agencies.

The employer can provide up to $50,000 of low cost group life insurance for all employees tax deductible without the employee being taxed on the premium paid under IRS Sec. 79. These programs can also offer additional insurance coverage options (some amount on guaranteed issue bases) with the premium paid for the amount over $50,000 reported in the employee’s gross income. The employer can also offer voluntary programs which often provide guaranteed issued amounts for the employee and their family.

Disability Income Insurance

Group disability income insurance is often overlooked as an employee benefit; however this benefit can potentially provide the employer with sufficient employee loyalty.

When the premiums are paid by the employer, the benefits are tax deductible to the employer and not included in the employee’s taxable income. When the benefits are received by the employee they are taxable as ordinary income.

Short Term Disability Income (STD) programs provide benefits within the first 14 days of either an employment or non-employment related disability; the benefit are typically paid for up to one year regardless if the disability is due to an ankle injury or due to pregnancy.

Long Term Disability Income (LTD) programs are designed to provide benefits when the employee is disabled for longer periods of time, such as 24 to 60 month or even to age 65; the benefits usually begin after 6 month or later and are coordinated with a Short Term Disability Income program

STD and LTD can also be offered through a voluntary program

Long Term Care Insurance

The employer can offer Long Term Care Insurance on a group or individual program for the benefit of the employee, their spouse and in some instances the employee’s parents. In most instances the premium is fully tax deductible as an employee benefit and the benefit will not be taxable when paid. The policies can be designed so the premiums paying interval is while the employee is working full time,  to be paid-up with no additional premiums required after age 65 or after 10 years of premium payments.

Individual Programs Insurance

Some employers are unable or unwilling to provide group benefits for all their employees because of their business structure, continual turn-over of employees, high cost of benefits or the uncertainty of consistent cash flow. Individual programs could be subsidies by the employer for selective employees as needed. However special care should be use when considering these options.

Combination Program

Employers using a combination of group and voluntary insurance as well as discount programs, have found this to be an effective use of their employee benefit dollars

Reimbursement Programs

When considering changes in employee benefits by incorporating deductibles, larger co-payments, or discount programs to replace portions of the insurance programs, the introduction of a reimbursement program to provide the employee with non-taxable reimbursement of their out-of-pocket cost (a percentage or in full) may often lower the premium cost to the company by as much as 25% or more per year and still provide the employee with similar or no change in overall benefits. This requires close analysis and carefully designed written documents before implication.

Cafeteria 125 Plans, Flexible Spending Accounts and Health Saving Accounts

 

These are all programs that allow and employee the ability pay their portion of the employee benefit on a pre-tax bases therefore saving Federal, State (in most cases), Social Security and Medicare taxes on this portion of their income, this amount would be a minimum of 6.2% Social Security and 1.45% Medicare Tax (employee and employer total = 15.3%) In 2011 and 2012 the tax reduction for the employee’s portion of the Social Security Tax of 2% reduces the savings temporary

Cafeteria 125 POP (Premium Only Plan) programs require a carefully designed written document and for employers with fewer than 100 employees, little or no administration or IRS reporting.

Flexible Spending, Health Saving Accounts, provide additional benefits and restriction. These programs require more closely analysis and explanation before implication. These programs also require administration and IRS reporting.

 

 

 

 

 

 

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