Topics and Updates

Employee Benefits Programs

An employer with 20 employees, each contributing an average of $500 a year to a Section 125 Plan will save almost $800 in taxes. Imagine what you could be saving in annual taxes by implementing a plan!

Employers are looking for ways to provide competitive employee benefits at an affordable cost.

Consumer-driven health plans go a long way toward helping employers and employees save on the rising cost of health care. But, how can employers help employees save even more on their share of the cost of health insurance? And, what about expenses the health plan doesn’t cover?

Since 1978, many employers have been adopting an IRS-approved benefit plan that helps employees save 25% to 40% on the cost of heath care.

It’s called a “Section 125” Plan. By adopting this plan, employers help employees stretch their paychecks. Employees who participate usually see an increase in take-home pay! And, employers experience an increase in the bottom line, too!

How it works

Employees set aside money from their paycheck – before taxes are taken from their gross pay – to pay for insurance premiums and out-of–pocket expenses not covered by their health plan. Employees who participate in the plan, save federal tax, FICA tax and state tax in most areas, because their contributions are taken out of their gross pay before taxes are taken out.

The simplest kind of Section 125 Plan is called a Premium Only Plan (POP).

The Premium Only Plan (POP) is available to employees who share in the cost of employer-sponsored insurance premiums. The plan saves payroll taxes for employers, and employees save $25 to $40 on every $100 they contribute through payroll deduction.

Premiums may include an employee’s share of employer-sponsored health, dental, disability, accident, and group-term life insurance. For instance, an employee who makes a payroll contribution of $200 each month for his/her portion of health insurance premiums, will save between $50 and $80 each month, depending on his/her total tax rate. In this example, the participant will save between $600 and $960 in taxes, in one year! And you save payroll taxes too! For every dollar employees contribute to the plan, the employer saves about 8%, in FICA taxes.

And what about those expenses a health plan does not pay? How can a section 125 plan help?

With a Section 125 Flex Account, employers and employees save even more. Sometimes referred to as flexible spending accounts, cafeteria plans, Section 125 plans, or flex plans, flex accounts let employees set aside a portion of each paycheck – before taxes are taken out of gross pay – and put it into an account the participant can use to pay for expenses not covered by a health plan. (Typically, expenses not covered by your health plan include, but are not limited to doctor and prescription co-pays, orthodontia expenses, contact lens, glasses, LASIK eye surgery, smoking cessation programs, and over-the-counter items like pain relievers, cough medicines, etc.)

It’s called the take care® plan.

During the year, employees use their Flex account to pay for expenses like healthcare, dependent care, and commuting to and from work. Contributions to the Flex plan and reimbursements for qualified expenses are tax-free. Employees save 25% to 40% on everyday items when they pay for them with their take care flex accounts.

How Flex Accounts work

Employees estimate what they will spend over a twelve-month period on everyday expenses.
► Employee completes an annual election form.
► Employer divides the annual election by the payroll periods and payroll deducts the money on a pre-tax basis.
► Employees use the take care card to pay qualified expenses from their personal flex account.
► Qualified payments are tax-free.

Similar to a POP plan, the employer saves about 8% (the FICA match) on every dollar employees contribute to their take care accounts.

Advantages to you

► Save payroll taxes.
► Cushion health insurance rate increases.
► Lower your overall employee benefit costs.

The result for you

► Substantial payroll tax savings meaning more to your bottom line.
► Enhanced benefits your employees will appreciate.
All you need to do to implement this benefit for you and your employees is to adopt the appropriate plan.

Please contact us for more information.

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A move that is consistent with
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strategy

The overall, long-range plan.

shot

A strong, unexpected move.

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The point in the game where
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