For a Powerful PowerPoint explanation of Voluntary Benefits how it works for Employer and Employee's
4 tax benefits of employer-sponsored health coverage
1. YOUR PREMIUMS ARE TAX-EXEMPT
Employer-provided healthinsurance premiums for group health plans are tax-exempt. That means itcan lower or even completely erase your tax duties.
These tax-exempt premiums cameabout during World War II when companies were trying to evade wage andprice controls and have been a part of our health policies ever since.
Today’s headlines have a lot ofdiscussions about the future of healthcare. While some changes may be on theway, policies like these are essential to giving employers the incentive theyneed to take good care of their employees.
2. YOUR CONTRIBUTIONS ARE DEDUCTIBLE
Most carriers require employersto pay half of their employees’ premiums (but there’s no requirement for payingany dependent premiums).
When you pay part of yourteam’s premiums, it unlocks another big tax benefit. You see, paying part ofyour team’s premium is a generous act that also doubles as a business expense.When filing your taxes, that means you can write off those premiums as adeduction.
The premiums you pay are also atax-free benefit for your employees. According to the IRS, if an employercovers health insurance costs for employees (plus their spouses anddependents), the employer’s payments are not considered wages. Therefore,they’re not subject to Social Security tax, Medicare tax, FUTA,or federal income tax withholding.
3. POP PLANS CAN HELP YOU SAVE EVEN MORE
A premium-only plan (POP) opensthe door to extra tax savings.
POP plans (which are also knownas basic cafeteria plans) come from IRS Section 125. They let youremployees pay for their share of their health insurance premiums with pre-taxdollars, which means that both you and your team pay less intaxes.
Your broker typically sets upyour POP plan when they enroll you in your benefits plan.
Here’s an example of how thesavings works for your business:
your organization has ten employees who each make $40,000 a year, a POP plan can help you save $2,460 a year.
At the same time, one of those employees who earns $4,000 a month could wind up with an extra $972 a year of net pay:
4. YOU PAY FEWER PAYROLL TAXES
If you offer a cafeteria plan,the size of your payroll gets smaller in the eyes of Uncle Sam because thepre-tax premiums employees pay for health insurance aren’t counted as income,which reduces your payroll. Only the taxable wages they are paid count towardyour tax burden.
A smaller payroll means lesspayroll tax.
(Drops the mic.)
BONUS: YOU GET WORKERS’ COMP SAVINGS, TOO
Your workers’ comp premiums arebased on the size of your payroll, too. When employees pay for health insurancepremiums with pre-tax dollars, that means workers’ comp premiums decrease aswell.
So what are you waiting for?
When you look at the bigpicture, there are lots of reasons offering health insurance is a healthychoice. Not only does it empower your team to take control of themselves, butyou’ll also sweep up a ton of tax breaks while doing so. Review thebenefits above and take comfort in knowing that when tax time comesaround, some of your money can sail right back your way.
Contact me today!