Employee Benefit Plans Continued…

Cafeteria plans benefit both employer and employee. Employee participation in this type of plan reduces employment taxes paid by an employer. The employee increases their take home pay at no expense to the employer as a result of insurance premiums and retirement account contributions that are taken out before taxes.

Healthcare Options
Healthcare insurance covers reimbursement for a bevy of things: medical fees, eye exams, dental work, prescription drugs, hospital services, surgery, false teeth, x-rays, weight loss programs, chiropractors, acupuncturists, etc, etc, etc. A healthcare package will follow one of two plans, either a Health Reimbursement Arrangement (HRA) or a Medical Reimbursement Plan (MRP).

HRAs are driven by account balances that can be rolled over from year to year if the employer will allow. They empower employees to better manage their own healthcare. Employers determine the maximum amount of reimbursement and whether or not to place a cap on the amount carried over from year to year. Any size organization can implement an HRA.

MRPs are similar to HRAs and have the same flexibility. They differ by allowing employers to reimburse cost from a specific time period where HRAs roll over and will provide benefits after an employee terminates employment.

Retirement Plans
There are several types of retirement plans and most companies offer a couple of choices to their employees.

A 401(k) plan allows employees to give a portion of their earnings to a retirement plan on a pre-tax basis. The employer can choose to match contributions in order to encourage employee participation.

An Employee Stock Option Program, or ESOP, is a retirement plan that invests primarily in employer stock. Contributions into an ESOP are tax deductible up to 25%. This allows employees to have a sense of ownership and share in the company growth.

A Defined Benefit Plan is the only qualified retirement plan that gives employees a guaranteed retirement benefit. These plans allow the participant to cash out upon retirement or draw a monthly benefit based on compensation and years of service. Defined benefit plans are ideal for smaller employers unable to save for retirement in their early years. It allows them to play catch up.

Profit Sharing plans allow employees to share in company profits and give the employer flexibility in determining the amount of annual contribution.

A 403(b) plan is similar to a 401(k) plan but has different rules on contribution limits and requirements.

Depending on what the employer offers and what the employee envisions for their future, one of the plans offered should be a suitable fit.

By Lisa Sharp