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How To Turn Business Losses Into Cash Flow
When the typical new business operator starts a business, they concentrate on making the business succeed. That is necessary but not the only thing that a business operator should concentrate on. A business depends on cash flow to exist and...
How To Use Outsourcing To Beat Your Competition
Outsourcing is when you hire outside professionals or services to take on part of your business workload.You may want to outsource part of your work because you don't have the room, you need an expert, you have periodic busy periods, or you need...
Reducing Debt Before It's Too Late ... How to avoid the pitfalls of creeping debt.
Reducing debt usually isn't a high priority for people until they have already gotten into trouble with overspending. Using a few basic guidelines, and debt calculations, can help you see when your debt load is getting into the danger zone.
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Success Tip : Making Your Business Look BIGGER to Your Customers
IT’S EASIER THAN YOU THINK NOT TO LOOK SMALL! Certain things will make your company look and feel small to investors and customers. By avoiding these easy to fix traps, you can go a long way in making your company appear more mature. First you must...
Taxes as a Competitive Advantage in the Global Economy
Building an ownership society in a tax competitive world.
Like many fellow citizens of this great country, I listened to the President¡¦s Inaugural Address on January 20th. It was interesting, but it just flowed over me with nothing really...
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Cafeteria Plan Employee Benefit Should be Another Feather in Your Benefit Program's Cap
IRS code allows for employers to implement a pre-tax Section 125 Cafeteria Plan as an employee benefit. This plan allows for unreimbursed insurance expenses to be paid pre-tax. Examples include insurance premiums, doctors office co-pays, prescription co-pays, eye exams, eye glasses, contact lenses, laser eye surgery, orthodontics, and more...
Implementing a Section 125 Cafeteria Plan will strengthen your benefits program, save your company FICA taxes, and save participating employees 17% to 40% in taxes (depending on their income tax bracket). What other benefits can you implement that strengthen your benefits package and you can do so with little or zero out-of-pocket dollars?
If your employees are paying any portion of the monthly insurance premiums, then to save FICA taxes, implement the Premium Only Plan (POP) portion of a pre-tax 125 plan. A POP allows for employees to pay their portion of the group insurance premiums on a pre-tax basis and is a good start to saving taxes for you and your employees. You will save FICA taxes while saving your employee 17% to 40% on dollars they're already paying.
With a POP there is no real ongoing administration as you'll use payroll to take care of the dollar flow's. Discrimination testing is a requirement that will need to be performed at least once at the beginning of each plan year to ensure your plan is in compliance.
To take your pre-tax 125 plan to the next level means implementing the Flexible Spending Accounts (FSA) portion of a pre-tax 125 plan. Generally, there are two FSA accounts including a Medical FSA (medical / dental / vision) and a Dependent / Elder Daycare FSA.
These FSA accounts will allow for the unreimbursed out-of-pocket expenses to be paid on a pre-tax basis. Examples include dependent daycare, office co-pays, prescription co-pays, eye exams, eyeglasses, contacts, orthodontics, and more.
These flexible spending accounts (FSA) are an easy way to supplement any gaps in your existing benefits program, save money for you and your
employees, and is a great morale booster.
If you're a small employer that doesn't have a dental or vision plan because of costs. Implementing the FSA will at least allow for your employees who have these types of out-of-pocket expenses to pay them on a pre-tax basis. Wouldn't it make your employees happy to be able to save 17% to 40% on a $5,000 orthodontic expense for a family member? That would equal a $1,250 tax savings for an employee in the 25% tax bracket. Not to mention, it would save you over $380 in FICA taxes as well.
The FSA accounts are where the administration hassles of receiving claims, verifying claims as eligible expenses, answering employee questions, reimbursing claims, etc. are seen. Which may lead you to consider outsourcing your ongoing administration through a qualified third party administrator. If you've only got a few participants in the FSA in-house administration is something you can probably handle, but with monthly minimum administrative fees outsourcing is pretty economical.
Partnering with a qualified Cafeteria Plan Administrator such as BusinessPlans, Inc. (BPI) - myCafeteriaPlan will provide you and your employees with online account access 24-hours a day. As an employer, your 24-hour Internet access allows you to query reports, add employees, term employees, and check the status of your plan around the clock when you want and need your plan information.
Every organization has limits on the resources it has available for use. Outsourcing will allow your company to focus and redirect its resources; most often people resources, from non-core activities to profit gaining activities.
About the Author
David Turner is Vice President at BusinessPlans, Inc. (BPI)- myCafeteriaPlan, which has been a third party administrator for over 14 years for pre-tax section 125 cafeteria FSA plans, section 105 healthcare reimbursement arrangements (HRA), and section 132 qualified transportation (Transit) plans. Visit www.myCafeteriaPlan.com or call 800.865.6543 for more information.
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