EMPLOYER ADVANTAGES
The most frequently identified
advantage for a Section 125 Flexible Benefit Plan is cost containment
of benefit dollars. Section 125 allows an employer to move in the
direction of a “Defined Contribution” approach to benefits. This is
accomplished by offering core benefits with a selection of voluntary
benefits. By adding voluntary products, an employer can enhance their
benefit plans without increasing corporate costs.
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In addition, the employer will
save payroll taxes on all premiums redirected through Section 125 by
the employee. As well as employee tax savings, for each $100 of
premium paid through payroll deduction, the company will save around
$10.00 in payroll taxes.
For example, a recent client with
48 employees contributing $122 per day for dependent health coverage
and voluntary benefits saved $39,000 per year in taxes for their
employees and an additional $11,243 per year in payroll taxes for the
company.
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Another key advantage of the
Section 125 Flexible Benefit Plan is the element of flexibility and
choice that is offered to the employer. The employer can attract and
retain employees in an environment that builds better employee morale
and at the same time, helps control benefit expenses and improves the
company’s bottom line by reducing payroll taxes. It is a “win-win”
opportunity.
Premiums
paid through Section 125 are not subject to FICA/FIMA, federal income
tax, nor FUTA. Individual state statues will govern tax treatment of
worker’s compensation, state income tax, SUTA, and other state
mandated benefit programs. |
