Your employees are the most valuable asset in your organization. To attract and retain quality talent, you need to offer a range of competitive benefits. A benefits package that makes sense - and is affordable -. For your organization and employees
With this in mind, you may ask, "Can Employers still contribute to personal bonuses?"
new care legislation health has leveled the playing field for smaller organizations to offer competitive health benefits using software solutions to offer real dollar contribution for employee health insurance premiums. in other words, pay off employees for their bonuses, instead of paying for a group health insurance policy.
This solution allows your small organization to provide health benefits and provide a powerful tool for recruiting and retain the best employees.
There are two main ways to make a contribution funded by the employer to employees personal health insurance plans.
1. Taxable healthcare Stipend
The first option is a taxable benefit health. With this approach, the employer reimburses employees for costs of personal health plans justified on an after tax basis for a care allowance specified by the employer.
By providing a taxable contribution, the employer shall ensure employees use the dollars on health insurance and employees associate the arrangement as a health benefit
Tip: . Stipend amounts are the amounts of the maximum contributions. If an employee does not spend their allowance at the end of the year, unused funds remain with your organization
However, a major limitation of this approach is the lack of tax benefit -. Requiring employees to pay taxes on the reimbursements they receive. Consequently, most employees prefer their employers to establish an arrangement providing for the reimbursement tax-free cost of personal health plan.
Under section 105 of the Internal Revenue Code (IRC), employers are able to establish a self formal repayment plan for uninsured medical expenses to reimburse employees for premiums 'insurance on a tax-free basis. Which brings us to option two.
2. Plan for reimbursement of health care free of tax (HRP)
The second option is a health tax free allowance. With this approach, the employer used section 105 of the IRC to establish a repayment plan of formal self-insured medical expenses to reimburse employees for costs of personal health plans justified on a pre-tax basis .
This type of arrangement is considered a health care reimbursement scheme (HRP); not to be confused with an employer's payment plan authorized under section 106.
When providing refund tax free different health insurance policies by HRP, the the employer must ensure compliance with federal regulations, including but not limited to legal plan documents, the summary plan descriptions, and new "market reforms" required by the affordable care Act
Tip :. Provide tax-free repayment plan is better than money because:
- the company saves on FICA / FUTA pays taxes
- employees do not pay taxes on refunds (received "tax-free").
FAQ - What about simply increase salaries
In addition to these two main options, some employers consider increasing employee taxable wages to help with their personal health plans. For example, a company may offer a tax increase, allowance or bonus payment with the hope that employees will use on health care.
However, there are some key problems with the increase of taxable wages for health insurance as i t is very difficult to take a raise for insurance disease, it is the guarantee employees will not spend money on health insurance and the employer loses the best candidates to competitors with formal health benefits
FAQ -.? How do I set a budget for employee reimbursements
If you are concerned about setting a budget for your HRP, we have two simple approaches :.
- Divide your budget for health services by the number of eligible employees
Example :. If you have 10 employees, and your monthly budget health benefits is $ 00, each employee will receive an allowance of $ 0 / month
- Set your budget taking into account insurance average individual health rates, and bringing an estimated percentage
Example :. If the average individual health insurance policy for your 10 employees is $ 250 / month and you want to contribute to 85%, then you 'd provide each employee $ 213 / month - for a monthly budget of $ 2125
Conclusion:
the answer to the common question, "employers can contribute even personal premiums" is yes, under section 105 of.? the Internal Revenue code (IRC). as your organization evaluates health benefits when you pay the premiums, consider the taxable and non-taxable options available. with tips on the disadvantages of disease to give insurance for wage increases, and information on budgeting, you are now more equipped to determine what course of action is best for your small business.
Editor Note: This article was originally published in June 2014.
What questions do you have to contribute to personal health plans for employees?
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