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It was stated over three months ago that real health care reform would be passed in the House of Representatives by July 31st, 2009. A plan that was to revolve around Obama’s three core principles was to be a reality. The President’s three principles are to reduce costs, guarantee choice, and ensure every American has quality, affordable health care.
It is now September, and small business owners are still waiting to see what will come of health care reform. While they sit and wait, they are missing out on a great opportunity to reduce costs, guarantee choice and ensure every employee has quality, affordable health care. It’s called a Cafeteria Plan, which allows businesses with 99 or fewer employees to take advantage of the many benefits that fit in line with the very three principles government is still trying to work with today.
The reduced cost can be seen primarily in the tax savings for the employer and employee. Both parties save on taxes and therefore increase their spendable income. Employees' pretax contributions are not subject to federal, state, or social security taxes. Employers save on the employer portion of FICA, FUTA, and Workers' Compensation premiums.
Choice is guaranteed, because, as the name Cafeteria suggests, a Cafeteria Plan allows employees to choose between different types of benefits. Today employees may be able to save with the following options:
- Premium Only Plan (POP) or Health Care Premium Reimbursement (HCPR): which can be utilized by employees to pay their insurance premium expenses on a pre-tax basis.
- Flexible Spending Account (FSA): allowing employees to pay their out-of-pocket medical expenses on a pre-tax basis.
- Dependent Care Assistance Program (DCAP): giving employees an opportunity to pay their child and/or dependent care expenses on a pre-tax basis.
It is these choices that make Cafeteria plans one of the best ways for employers, facing a turbulent economy, to ensure quality, affordable health care for their employees. Many small business owners want to provide a benefit back to their employees. A Cafeteria Plan allows employers to have the ability to assist employees with the overwhelming expense of health care, whether they offer health care benefits or not
Roughly a third of the 50 states have adopted some form of state mandated, tax free, cafeteria plans. With more states choosing to mandate cafeteria plans, there needs to be more education on the advantages of such a plan for the employer and employee. Many would find that cafeteria plans are really less burdensome than one would think when it comes to dealing with healthcare.
Essentially with the choices provided to the employee, a Cafeteria Plan enables an employer to transfer funds from an employee's paycheck each pay period on a tax free basis to an "account" that is earmarked for only that employee. Since these funds are transferred from the employee's wages on a pre-tax basis, they are saving federal and most state and local taxes on these dollars, as well as Social Security and Medicare Taxes.
For companies with less than 99 employees, providing some sort of benefit to their employees is important. Waiting another three months to ensure quality, affordable health care for their employees is not an option.
Anne Case BASE - Marketing
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