Designing a Benefit Plan to Meet Your Needs

Benefit offerings have become increasingly important to help attract and retain employees in a time when people are flocking to new opportunities in unprecedented numbers. With the growing significance placed on benefits, it’s important for employers to evaluate what options are available to help meet the needs and wishes of their employees while ensuring it makes sense financially. In this post, you’ll find several options aimed to help employers design benefit offerings that meet their goals.

Employer Contributions: Helping to Cover Out-of-Pocket Expenses

One common way that employers are trying to attract and retain employees is by offering employer funds to help cover out-of-pocket expenses. There are several different tax-advantaged options to help achieve this goal: flexible spending accounts (FSAs), health reimbursement arrangements (HRAs), and health savings accounts (HSAs). Each option comes with a different set of regulations and can help employers meet different goals.

Employers and employees both benefit from these accounts:

• Employees receive funds, free of taxes, that are allocated towards covering eligible out-of-pocket expenses, while also being able to contribute tax-free dollars of their own (for FSAs and HSAs).
• Employer funds go further when contributing to an FSA, HRA, or HSA because it enters the accounts tax-free.

It’s important to note that FSAs and HSAs are subject to statutory maximums. To view plan limits, visit www.ebcflex.com/planlimits.

Flexible Spending Account

An FSA allows employees to set aside a pre-tax portion of their income to use on eligible medical expenses or dependent care expenses. This also saves employers money by reducing the amount of income they are required to pay payroll taxes on, as employers do not pay payroll tax on the funds employees elect to their FSA. Some employers also opt to contribute money to their employee’s FSA to offer additional assistance towards their eligible expenses.

Offering an FSA may be a good option for employers looking to offer flexible options to meet more employee needs while also helping employees save on taxes from the income used on eligible expenses.

Health Reimbursement Arrangements

There are several different types of HRAs, such as integrated, limited purpose, retiree, individual coverage, and more. For the purposes of this article, we are addressing integrated HRAs.

An HRA, like an FSA, is a tax-advantaged account that employees can use on eligible medical expenses. However, an HRA is owned and entirely funded by an employer. HRAs are limited to employees who are enrolled in an employer’s group health plan.

HRAs allow employers to design an account that best compliments their health insurance plan. With an HRA, employers can decide which expenses are eligible for reimbursement, when the funds will be available, and how much they will provide their employees.

To view sample ways employers can design their HRA to help offset rising deductible costs, encourage longevity, and more, visit www.ebcflex.com/buildingebchra.

Health Savings Account

An HSA is a savings account for eligible expenses that offers employees triple tax savings and investment opportunities to help grow their savings and prepare for retirement. Unlike an HRA, an HSA is an employee-owned account that individuals can contribute to, in addition to their employer. HSAs have been growing in popularity with employees because there is no timeframe that the funds must be used by, account balances rollover from one year to the next, and the account is portable for the employee if they leave employment.

Offering an HSA can be a great option for employers with the goal of increasing employee longevity.

Cash for Waiving Group Coverage: Incentivize Exploring Other Insurance Options

For some employers, the cost of health insurance-related expenses is reaching unimaginable levels. To combat this, employers may consider offering cash to employees who choose not to take health insurance from their company. Before choosing to do this, employers should think about both the benefits and drawbacks of this option.

Benefits:

• Employers can reduce their overall insurance cost.
• Employees have more flexibility to consider other health insurance options that may align more with their needs.

Drawbacks:

• Employees and employers will pay tax on the funds.
• Employees grow to expect this will be available, making it difficult to stop offering cash incentives once it’s implemented.
• This could lead to adverse selection.

Commuter Benefits: Encourage Returning to the Office

With the ever-increasing gas prices and the comfort many employees have found in working from home, some employers are looking for a way to incentivize employees to go in to their office or jobsite. One way employers can attract employees back to the office is by offering commuter benefits. Commuter accounts offer tax savings to participants on their transit and parking expenses via pre-tax payroll deductions and in some cases employer contributions.

Eligible commuter expenses include:

• Parking at work
• Work-related transit expenses (train, bus, ferry, subway, etc.)
• Vanpooling (Uberpool, LyftShared, etc.)

The main requirement to qualify as an eligible commuter account is that it must be for work-related transportation. For example, taking the train for personal purposes does not qualify as a commuter expense and would not receive tax benefits. However, if an employee took the train to work, it would be an eligible commuter expense.

Offering commuter benefits may be beneficial for employers who want to encourage their employees to return to the office or to meet a local ordinance requiring transportation benefits by certain employers.

Attend our Webinar!

We have just scratched the surface of benefit customization options in this post. If you’re interested in learning more, be sure to attend EBC’s webinar to hear from two members of our compliance team about Benefit Plan Design Strategies and Solutions to Meet Your Needs.

Register today: www.ebcflex.com/webinars.