Many companies offer a variety of employee benefits to their staff in order to keep them satisfied. The types of benefits include, but are not limited to, health insurance, retirement plans, vacation and sick leave. This Financial Guide provides an overview of the types of benefits that businesses provide for employees and what's involved in offering them.
Table of Contents
Employee benefits play an increasingly important role in the lives of employees and their families and have a significant financial and administrative impact on a business. Most companies operate in an environment in which an educated workforce has come to expect a comprehensive benefits program. Indeed, the absence of a program or an inadequate program can seriously hinder a company's ability to attract and keep good personnel. Employers must be aware of these issues and be ready to make informed decisions when they select employee benefits.
Designing the right benefit plan for your employees is a complex task. There are many issues to consider, including tax and legal aspects, funding, and finding the right vendors or administrators.
An employee benefit plan protects employees and their families from economic hardship brought about by sickness, disability, death or unemployment. It also provides retirement income to employees and their families, and establishes a system under which leave or time off from work can occur should the employee need it.
The employer must pay in whole or in part for certain legally mandated benefits and insurance coverage:
Funding for the Social Security program comes from payments by employers, employees, and self-employed persons that are deposited into an insurance fund that provides income during retirement years. Full retirement benefits normally become available at age 65. For younger individuals, the date for maximum benefits is being adjusted to age 67. These benefits are discussed in more detail in the Retirement Benefit Plans section of this Financial Guide. Other aspects of Social Security deal with survivor, dependent and disability benefits, Medicare, Supplemental Security Income, and Medicaid.
Unemployment insurance benefits are payable under the laws of individual states from the Federal-State Unemployment Compensation Program. Employers contribute to the program based on total payroll.
Workers' compensation provides benefits to workers disabled by occupational illness or injury. Each state mandates coverage and provides benefits. In most states, private insurance or an employer self-insurance arrangement provides the coverage. Some states mandate short-term disability benefits as well.
A comprehensive benefit plan can include the following elements:
A benefit plan can also include bonuses, service awards, reimbursement of employee educational expenses and prerequisites appropriate to employee responsibility.
Here are some of the reasons employers offer benefits:
A combination of benefits programs are the most effective and efficient means of meeting economic security needs. For many employers, a benefit plan is an integral part of total compensation, because employers either pay the entire cost of a benefit plan or have employees contribute a small portion of premium costs for their coverage.
Employers might offer medical and dental plans, disability benefits, and life insurance.
Medical and Dental Plans
A serious illness or injury can be devastating to an employee and his or her family. It can threaten their emotional and economic well-being. Thus, adequate health insurance is important to employees and is part of a solid group plan.
Group health plans help attract and keep employees who can make your business a success. They relieve your employees of the anxiety of health care costs by providing the care they need before illness becomes disabling, thus helping you avoid costly employee sick days.
Group health plans usually cost less than purchasing several individual policies with comparable coverage. Moreover, there are tax advantages to offering health care benefits: your contribution as an employer may be deductible and the insurance is not taxable income to your employees.
As an employer, you can choose either an insured (also known as an indemnity or fee-for-service plan) or a pre-paid plan (also known as a health maintenance organization).
Traditional Indemnity Plans. An indemnity plan allows the employee to choose his or her own physician. The employee typically pays for the medical care and then files a claim form with the insurance company for reimbursement. These plans use deductibles and coinsurance as well. A deductible is a fixed amount of medical expenses an employee pays before the insurance plan reimburses any more expenses. Coinsurance is a percentage of medical expenses the employee pays, with the plan paying the remaining portion. A typical coinsurance amount is 20 percent, with the plan paying 80 percent of approved medical expenses. Listed below are the most common types of insurance arrangements (indemnity plans) providing health care to groups of employees.
Health Maintenance Organizations. Health maintenance organizations (HMOs) provide health care for their members through a network of hospitals and physicians. Comprehensive benefits typically include preventive care, such as physical examinations, well-baby care, and immunizations, and stop smoking and weight control programs.
The main characteristics of HMOs are as follows:
Preferred Provider Organizations. Preferred provider organizations (PPOs) fall between the conventional insurance and health maintenance organizations and are offered by conventional insurance underwriters. A PPO is a network of physicians and/or hospitals that contract with a health insurer or employer to provide health care to employees at predetermined discounted rates.
Some of the key elements of a PPO are:
Although there is no requirement for employees to use the PPO providers, there are strong financial reasons to do so.
Dental Benefits. Medical insurance frequently includes dental plans. Most plans cover all or portions of the cost for the following services:
Health Savings Accounts. The HSA allows employees to deduct contributions to the HSA even if they do not itemize deductions. The HSA plan allows employees who are covered by a high-deductible health plan to contribute pre-tax amounts that will be used to cover medical expenses or used later for retirement. Qualified amounts contributed to an employee's HSA by an employer can be excluded by the employee. Distributions from the HSA are not taxable as long as they are used for medical expenses.
A disability plan provides income replacement for the employee who cannot work due to illness or accident. These plans are either short-term or long-term. They can be distinct from workers' compensation because they pay benefits for non-work-related illness or injury.
Traditionally, life insurance pays death benefits to beneficiaries of employees who die during their working years. There are two main types of life insurance:
Protection provided by one-year, renewable, group term life insurance with no cash surrender value or paid-up insurance benefit, is very popular. Frequently, health insurance programs offer this coverage.
You should use the same principles for selecting a life insurance program as you do for selecting health insurance. Finding a benefit plan that meets your budget constraints and fills the needs of your employees is crucial. Among the sources to check are:
Rising costs are prompting small business owners to take a look at a form of health care coverage previously considered an option only for big business: self-insurance. With self-insurance, the business predetermines and then pays a portion or all of the medical expenses of employees in a manner similar to that of traditional healthcare providers. Funding comes through the establishment of a trust or a simple reserve account. As with other health care plans, the employee may pay a portion of the cost of premiums. Catastrophic coverage is usually provided through a "stop-loss" policy, a type of coinsurance purchased by the company.
The plan may be administered directly by the company or through an administrative services contract.
The advantages of self-insurance are listed below:
The drawbacks to self-insurance include the following:
The Affordable Care Act
The Patient Protection and Affordable Care Act of 2010, in concert with the enactment of the Health Care and Education Tax Credits Reconciliation Act of 2010, resulted in a number of changes that affect smaller business owners. Here are the highlights:
If you have 50 or fewer full-time equivalent (FTE) employees (generally, workers whose income you report on a W-2 at the end of the year) you are considered a small business under the health care law.
As a small business, you may get insurance for yourself and your employees through the SHOP (Small Business Health Options Programs) Marketplace. This applies to non-profit organizations as well.
If you have fewer than 25 employees, you may qualify for the Small Business Tax Credit Non-profit organizations can get a smaller tax credit. Small businesses and tax-exempt organization that employ 25 or fewer, full-time equivalent workers with average incomes of $50,000 or more as adjusted for inflation since 2014 ($52,400 or less in 2017), and, that pay at least half (50 percent) of the premiums for employee health insurance coverage are eligible for the Small Business Health Care Tax Credit.
Starting in 2014, the tax credit is worth up to 50 percent of your contribution toward employees' premium costs (up to 35 percent for tax-exempt employers). The tax credit is highest for companies with fewer than 10 employees who are paid an average of $26,600 or less ($26,200 in 2017). The smaller the business, the bigger the credit is. For tax years 2010 through 2013, the maximum credit was 35 percent for small business employers and 25 percent for small tax-exempt employers such as charities.
Note: The credit is available only if you get coverage through the SHOP Marketplace, which opened to employers with 100 or fewer FTEs starting in 2016.
Additional Tax on Businesses Not Offering Minimum Essential Coverage. Effective January 1, 2015, an additional tax will be levied on businesses with 100 or more full-time equivalent (FTE) employees that do not offer minimum essential coverage and employers with more than 50 full-time employees starting in 2016. This penalty is sometimes referred to as the Employer Shared Responsibility Payment or "Play or Pay" penalty.
Excise Tax on High Cost Employer-Sponsored Insurance. Effective in 2022, a 40 percent excise tax indexed for inflation will be imposed on employers with insurance plans where the annual premium exceeds $10,800 (individual) or $29,100 (family). This is sometimes referred to as the "Cadillac Tax."
In summary, when deciding on a health, disability, or life insurance plan, consider what you and your workers want in a plan. Determine all costs associated with the plan and investigate the quality of potential insurance carriers, and examine the quality of each plan, including the benefits and restrictions such as:
Questions To Ask Before Signing a Benefits Contract
When Problems Arise
From time to time problems arise with benefit delivery. Patience on the part of the provider, the employer, and the employee usually brings a resolution.
Occasionally, unusually prolonged and difficult problems develop that do not yield to resolution. Such instances should be brought to the attention of your state's insurance department or commission, which is responsible for regulating insurance companies.
A financially secure retirement is a goal of all Americans. Since many of us will spend one-fourth to one-fifth of our lives in retirement, it is more essential than ever to begin preparations at an early age. Many financial planners report that an individual requires about 75 percent of his or her pre-retirement income to maintain the same standard of living enjoyed during one's working years.
Social Security, employer-sponsored retirement programs, and personal savings are the three sources of post-retirement income.
Social Security Benefits
Social Security provides retirement benefits for most persons employed or self-employed for a set period of time (currently 40 quarters; about 10 years). Benefits paid at retirement, traditionally at age 65, are based on a person's earnings history. The age at which you can retire at full benefits increases depending upon your current age. For younger individuals, full benefits begin at about age 67. Payments may begin at age 62 at a reduced rate or, if delayed beyond full retirement age, at an increased rate.
For a person with earnings equal to the U.S. average, the benefit will be about 40 percent of pay. For someone with maximum earnings, the benefit would be about 25 percent of the portion of pay subject to Social Security tax.
Employer-Sponsored Retirement Plans
A retirement plan makes good sense and can attract and reward employees. The benefits and tax advantages of supplementing Social Security with a qualified retirement plan are significant.
A qualified plan is one meeting IRS specifications. Currently, such contributions are tax-deductible and earnings accumulate on a tax-deferred basis. In addition, benefits earned are not part of the participant's taxable income until received, and certain distributions are eligible for special tax treatment.
Whether you are a sole proprietorship, a partnership or a corporation (employing many people or only yourself as the owner/employee), there is a wide range of options available. These can range from simple plans, which you establish and maintain, to complex versions, which require an actuary, attorney or employee benefits consultant. If you are active in the business, you can be included as a plan participant. Accountants, banks, insurance and investment professionals, as well as other financial institutions, can provide information on retirement plan products.
Depending on whether you are a sole proprietor, a partnership or a small corporation, the following plans are available:
Designing the Right Corporate Plan
Selecting the right pension plan for a corporation results from a process of identifying business needs and expectations, including
Although there are many different types of retirement plan options available to corporations, they fall into two general categories: defined benefit plans and defined contribution plans:
Defined Benefit Plans. With this plan, the benefits an employee will receive are predetermined by a specific formula--typically tied to the employee's earnings and length of service--and indexed for inflation. The law allows a pension of up to $220,000 a year in 2018 (up from $215,000 in 2017). The employer is responsible for making sure that the funds are available when needed (the employer bears funding and investment risks of the plan).
Such a plan can generally provide larger benefits faster (through tax-deductible contributions) than other plans. The price of providing a higher degree of tax savings and being able to rapidly shelter larger sums of retirement capital is having to meet additional reporting requirements. Defined benefit plans typically cost more to administer, requiring certifications by enrolled actuaries, and insurance payments to the Pension Benefit Guaranty Corporation (PBGC), which may review plan terminations.
Defined Contribution Plans. Also known as individual account plans, defined contribution plans specify the amount of funds placed in a participant's account (for example, 10 percent of salary). The amount of funds accumulated and the investment gains or losses solely determine the benefit received at retirement. The employer bears no responsibility for investment returns, although the employer does bear a fiduciary responsibility to select or offer a choice of sound investment options.
There are several basic types of defined contribution plans, including (1) simplified employee pension plans (SEPs), (2) profit-sharing plans, (3) money purchase plans, (4) 401(k) plans, (5) stock bonus plans, (6) employee stock ownership plans (ESOP), and (7) SIMPLE IRA plans.
1. Simplified Employee Pension Plans. A simplified employee pension (SEP) suits many small corporations. It requires no IRS approval, no initial filings, and no annual reporting to the government. Although SEP plans are called "pensions," they are actually IRAs, except that contributions to them aren't subject to the IRA dollar limits. The total deferral per employee each year can be up to $55,000 in 2018 (up from $54,000 in 2017) indexed for inflation or 25 percent of his or her annual earnings, whichever is less. There is also a limit on how much of an employee's earnings may be included in the percentage computation.
Contributions must be made on a nondiscriminatory basis to all employees who are at least age 21 and who have worked for any part of three of the past five years earning a minimal amount. Contributions can vary from year to year - you may even skip entire years. To be deductible for a year, the contribution must be paid no later than the due date of an employer's income tax return for the year, including extensions. Once made, the entire contribution is owned by the employee.
2. Profit-Sharing Plans. Similar to a SEP, a profit-sharing plan offers the flexibility of making contributions - up to the lesser of $55,000 in 2018 (up from $54,000 in 2017) or 25 percent of compensation.
Profit-sharing plans differ from SEPs in several distinct ways. An employer can apply a vesting schedule to the company's contributions, based on an employee's length of service with the company after the contribution is made. If an employee is terminated before becoming "fully vested," his or her funds will revert to the plan (reducing future contributions) or be reallocated among the remaining participants. In addition, profit-sharing plans permit the exclusion of part-time employees and can allow participants to borrow from the plan.
Profit-sharing plans, as all other qualified retirement plans, require the preparation of formal master documents as well as annual tax filings. A standardized master or prototype plan will often satisfy requirements and will typically be less expensive and simpler to set up and operate than an individually designed plan.
3. Money-Purchase Plans. With a money purchase plan, the employer is usually committed to making annual contributions equal to a designated percentage of each employee's compensation. This percentage may not exceed 25 percent of compensation, with a maximum contribution per employee of $55,000 in 2018 (up from $54,000 in 2017), indexed for inflation. Contributions must be made even in years in which there are no profits.
4. 401(k) Plans. These tax-deferred savings plans have become highly popular in recent years. The basic idea of a 401(k) is simple: it is a profit-sharing plan adopted by an employer that permits employees to set aside a portion of their compensation through payroll deduction for retirement savings. The amounts set aside are not taxed to the employee and are a tax-deductible business expense for the employer. Set-asides (called "elective deferrals") for any employee can't exceed $18,500 in 2018 (up from $18,000 in 2017) indexed for inflation. Elective deferrals don't count in figuring the employer's deduction limits. Thus, the employer's contribution up to the profit-sharing deduction limit plus the elective deferral, are tax-sheltered.
An employer's discretionary matching contribution can provide an incentive for employee participation as well as serve as an employee benefit. Employer contributions can be capped, to limit costs and a vesting schedule can be applied to employer deposits (employees are always 100 percent vested in their own contributions).
For employees, the opportunity to reduce federal - and often state and local - taxes through participation in a 401(k) plan offers significant benefits. While savings are intended for retirement, certain types of loans can provide employees with access to their funds - employees repay borrowed principal plus interest to their own account.
Some employers automatically enroll employees in the 401(k), giving them the right to opt out. After 2007, automatic enrollment arrangements (with the right to opt out) can escape the nondiscrimination tests if certain prescribed minimum employer contributions are made and certain prescribed investment types are available.
401(k)s can allow employee deferrals to go into a Roth account (based on a Roth IRA concept). Withdrawals from an account maintained 5 years or more can be tax-free after age 59 1/2. The amount deferred into the Roth 401(k) is currently taxable (unlike amounts deferred into the regular 401(k)).
5. Stock Bonus Plans. This is similar to a profit-sharing plan. The plan invests in employer stock, which is generally distributed to participants at retirement.
6. Employee Stock Ownership Plans. A special breed of qualified plan--the employee stock ownership plan (ESOP)--provides retirement benefits for employees. In addition, an ESOP can be used as a market for company stock, for financing the company's growth, to increase the company's cash flow or as an estate planning tool.
ESOP funds must be primarily invested in employer securities. ESOPs are stock bonus plans or stock bonus combined with money purchase plans. Tax-deductible contributions to the plan are used to buy stock for eligible employees. On retirement, the employee may take the shares or redeem them for cash. Complicated rules must be adhered to in the establishment and maintenance of an ESOP plan. Expert advice should be sought.
7. SIMPLE IRA Plans. Employers with 100 or fewer employees can establish "SIMPLE" retirement plans. The SIMPLE IRA Plan combines the features of an IRA and a 401(k). Employees can contribute to the SIMPLE IRA Plan, pre-tax, and the employer must make either a matching contribution for employees who contribute or a contribution for each eligible employee. The limit on the employee's contribution is $12,500 in 2018 (same as 2017), indexed for inflation. The penalties for withdrawing money from the Simple IRA Plan before age 59-1/2 can be higher than with other plans.
Plans Available to Non-Corporate Employers
Non-corporate employers can adopt any of the plans listed above that corporate employers can, except, of course, those based on stock in the employer corporation (stock bonus and ESOP plans). Defined benefit, profit-sharing, money purchase and 401(k) plans sponsored by non-corporate employers - that is, self-employed persons - who participate in the plans, which are sometimes referred to as "Keogh" plans.
Contribution limits for unincorporated businesses are the same as for corporate plans of the same type, except for contributions on behalf of the self-employed owner - sole proprietor, partner or LLC member, who for this purpose is treated as an employee. Contributions for a self-employed owner are based on the owner's self-employment net earnings. The contribution ceiling for money purchase, profit sharing, and SEP plans are the same: in effect, 20 percent of earnings (technically, 25 percent of earnings reduced by the contribution) up to a maximum contribution of $55,000 in 2018 (up from $54,000 in 2017), indexed for inflation. For defined benefit plans, a self-employed owner's benefit is based on self-employment net earnings less deductible contributions.
In plans such as 401(k)s or SIMPLE IRA plans where employees defer part of their salary, self-employed owners are deferring part of their self-employment earnings. For employees, deferred salary is excluded from taxable pay; for self-employed owners, deferred self-employment earnings are deducted.
Keogh plans, like comparable corporate plans, must be established by the end of the year for which you are making the contribution. Once established, you have until your tax return filing date - including extensions - to make the contribution.
SIMPLE IRA Plans generally must be established by October 1 of the year they go into effect.
A SEP may be established by the tax return due date, including extensions, for the year it goes into effect. Thus, a plan effective for 2017 can be created in 2018; contributions to that plan in 2018 will be deductible on the 2017 return if designated as for 2017 and made by the 2017 return due date including extensions.
Employee contributions. These are important elements of many employer plans, allowing employees to make their own tax-sheltered investments within the company plan.
In many cases such contributions are "pre-tax"-that is, from salary (reducing taxable pay), as in the case of 401(k)s, SIMPLE IRA Plans, and certain SEP Plans, called SARSEPs, formed before 1997. Pre-tax "employee" contributions can also be made by self-employed owners, in which case they reduce taxable self-employment earnings. The ceilings on such contributions are discussed above (SARSEP and 401(k) ceilings are the same).
Additional pre-tax contributions are allowed for participants age 50 or over. In 2018 the ceiling amount of such contributions, called "catch-up" contributions (misleadingly, since the amount or lack of prior contributions is irrelevant), for 401(k)s is $6,000 (same as 2017), for IRAs it is $1,000 (same as 2017), and for SIMPLE IRA Plans, the amount is $3,000 (same as 2017).
Employee contributions may also be after-tax. That is, they are not excludable (where made by employees) or deductible (where made by self-employed owners) but still grow tax-free once invested, until withdrawn. The contributions come back tax-free; only the earnings are taxed.
Employee after-tax contributions may be attached to a plan, such as a 401(k), or be to a standalone plan (maybe called a savings plan) for employees' contributions alone, or with some employer match.
Credit for low-income participants. "Lower-bracket" taxpayers age 18 and over are allowed a tax credit for their contributions to a plan or IRA. The "Saver's Credit" is allowed on joint returns of couples (filing jointly) with (modified) adjusted gross income (AGI) below $63,000 (up from $62,000 in 2017). The credit is a percentage (10, 20, and 50 percent) of the contribution, up to a contribution total (considering all contributions to all plans and IRAs) of $2,000. The lower the AGI, the higher the credit percentage: the maximum credit is $1,000 (50 percent of $2,000). Head-of-household dollar amount and the AGI credit percentage ranges are indexed for inflation.
The credit is allowed whether the contribution is pre-tax (credit is in addition to a deduction or exclusion) or after-tax.
Review plan decisions. There have been a number of recent law changes, especially in the already popular 401(k).
Those lacking tax-favored retirement plans should give plan adoption a new look. Those with such plans already should review the options, and what's required to take advantage of them. Professional guidance is essential and, as pointed out above, encouraged by the law.
Individual Retirement Accounts. An employer may establish IRAs for its employees to which the employees contribute though this is not usual. An employer may establish IRAs for employees within an employer plan. But virtually all IRAs are set up by the individual worker, employed or self-employed (occasionally for the worker's spouse) without the involvement of any employer.
An IRA is a tax-favored savings plan that allows workers to make contributions with pre-tax dollars (where deduction is allowed, see below) and defer taxation on earnings until retirement.
There are several limitations to IRAs:
Where to Get Pension Information
The variety of plans and related regulations are numerous. You should consult with your professional advisors regarding which options are available to you and which one best first your company's needs.
Questions To Ask Before Finalizing a Pension Plan
The old concept of "two weeks with pay" has given way to a wide variety of paid and unpaid leave plans for all businesses. Typically, these include:
In a strict sense, paying people for not working is a costly, unprofitable concept. However, time off from the grind is a tradition of the American workplace, and rightly so. Benefits can far outweigh costs. Among the many benefits for the employee are rest, relaxation, a new perspective, travel, pursuit of hobbies and release from daily tensions. The employer also benefits - the employee returns refreshed from the break in daily routine, possibly with new ideas and renewed energy for doing a better job. Employers also can observe the performance of employees in new situations, as they fill in for their vacationing coworkers, potentially leading to better allocation of workforce talents.
Eligibility for Leave
In determining employee eligibility for leave, an employer must find the answers to many questions, including the following.
Employers must determine when eligibility for leave begins: Immediately? After the first year? Many employers establish a paid annual leave schedule by declaring employees eligible for so many hours leave after they have worked a specified number of hours; for example, two hours leave for every 80 hours worked or one day for so many weeks worked.
Although the vast majority of employees will not abuse time allowed for compassionate, emergency or other leave categories, clear policies should be established on requesting such leave and on its duration.
Granting paid or unpaid leave is a costly benefit. Depending on the nature of an employee's work, you may need to require overtime from other employees or hire temporary employees to cover the absence. Extended leave situations pose special problems.
Questions To Ask Before Finalizing a Leave Plan
While all employees are usually eligible for benefits such as health and other insurance, retirement plans and leave, key employees have come to expect certain additional benefits related to their increased levels of responsibility. Among the perquisites or perks employers may want to consider for top performers and key or even all, employees are:
Like basic benefits, perquisites help attract and keep good employees. You can balance the far higher cost of providing some perquisites with expectations of increased production from the employees who benefit.
Key employees responsible for generating contacts for new business should receive consideration for company automobiles, personal expense accounts, professional memberships, and publications, club memberships, spouse travel on company business, credit cards, home entertainment allowances, end-of-year bonuses, and sabbaticals.
Sales staff responsible for keeping current customers satisfied should receive consideration for company automobiles (if needed for their duties), credit cards, personal expense accounts, professional memberships and publications, sales commissions, spouse travel on company business and end-of-year bonuses.
All employees should receive consideration for EAPs, physical exercise facilities (if you have them), parking, tuition programs, dependent day care, holiday gifts, service awards, credit unions, matched donations to universities, colleges and/or charities, physical examinations or health screenings when offered and merchandise discounts.
You may want to consider employer-employee cost sharing of such pre-requisites as physical exercise facilities, dependent day care, parking and, perhaps, some health screening services.
Before beginning any program of perquisites, check current tax law for treatment of each item:
To accommodate today's many variations in family relationships, lifestyles, and values, flexible compensation or "cafeteria" benefit plans have emerged. In addition to helping meet employee needs, cafeteria plans also help employers control overall benefit costs.
The idea behind cafeteria plans is that amounts which would otherwise be taken as taxable salary are applied, usually tax-free, for needed services like health or child care.
Besides saving employee income and social security taxes, salary diverted to cafeteria plan benefits isn't subject to social security tax on the employer. With a cafeteria plan, employees can choose from several levels of supplemental coverage or different benefit packages. These can be selected to help employees achieve personal goals or meet differing needs, such as health coverage (family, dental, vision), retirement income (401(k) plans) or specialized services (dependent care, adoption assistance, legal services (legal services amounts are taxable).
Careful planning and communication are the keys to the success of flexible compensation. Employees must fully understand their options to make choices of greatest benefit to them and their families. Both employers and employees must fully understand the tax consequences of the various options.
Keeping Current on Benefit Plans
The government has certain requirements for qualified pension or profit-sharing plans, as well as for most health and welfare plans. It is essential for you to stay current on developments that may affect your plan. Even small changes in tax laws can have a significant impact on your plan's ability to help you and your employees achieve your goals. Information on these requirements is available from the IRS and from qualified accountants and financial advisors.
Once you've implemented a benefits program, you'll want to tell your employees about it. Good communication is important in enabling employees to use the plan effectively and to appreciate the role of benefits in their total compensation.
Benefits orientation should be part of the orientation of a new employee. You can use newsletters, staff memos or employee meetings with audiovisuals to announce plan changes or answer employees' questions.
Before you implement any benefit plan, you should ask yourself some questions:
You now have some basic benefits information as well as the basic questions that need answers before you go benefit shopping for your employees.
An adequate benefit program has become essential to today's successful business, large or small. With careful planning, you and your employees can enjoy good health and retirement protection at a cost your business can afford.
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