How Are Employee Benefits Paid For?

The costs of benefits have risen (and keep rising) so high, that they are now a critical part of overall employee compensation. Until recent history, the only ways to modulate premium increases was to reduce benefits or increase employee contribution to the insurance premiums, and these are still commonly used options, depending on the needs of the business and employees.

However, due to participation requirements, if employee contributions are raised too high, the whole plan can be jeopardized due to lack of participation. There are several options that allow employees to share in the tax benefits that employers receive for employee benefits contributions.

Employer payroll can be setup to utilize an IRC Section 125 Premium-Only-Plan (POP) to allow for pre-tax employee contributions, which helps employee money go farther.

For employee out-of-pocket, cost-sharing expenses for co-pays, deductibles, etc., an IRC Section 125 Flexible Spending Account (aka Cafeteria Plan) can be used to also saves employee money.

Another option is for employees to use Health Savings Accounts (which can also utilize a POP plan), with employer contributions to cushion the impact of the Qualified High-Deductible Health Plan (HDHP).

As an alternative, some employers choose to self-fund health-plan deductibles through an IRC Section 105 Health Reimbursement Arrangement.

Healthy employees will not need to spend as much out-of-pocket, and they will be more productive, so all of these ideas work best in conjunction with a wellness plan to help the employees stay healthy and also advocacy plans to help educate and navigate the employees through the complicated and expensive healthcare system. An experienced benefits specialist can help with this also!

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  1. Why Should NJ Employers Offer Employee Benefits?
  2. When Should A NJ Startup Business Offer Benefits?
  3. What Are The Basics Of NJ Employee Benefits?
  4. How Should Employees Be Involved In Benefits Plan Selections?
  5. How Are Employee Benefits Paid For?
  6. How Can Employee Benefit Plans Be Used Most Effectively?
  7. What Types Of Rules Must Be Followed?
  8. What Is The Process At Policy Renewal/Plan Anniversary?
  9. How Can A NJ Benefits Specialist Help?
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