As the national labor shortage continues to impact employers, many companies are seeking to sweeten the pot and lure prospective applicants with better employee benefits packages. In addition to standard offerings like health and dental insurance, some employers are offering pre-tax benefits such as flexible spending accounts (FSA) or 401(k) accounts. You might be wondering, what is a pre tax benefit plan, and what benefits are usually pre tax? Typically, the cost of these benefits is taken out of employees’ wages before taxes, thus lowering the overall tax liability. Check out these additional four facts to better understand how pre tax benefits affect your company.
Offer the Best Pre Tax Benefits
There are many different kinds of pre tax benefits to choose from, so you should carefully consider what kind would be the most beneficial to your employees. Some companies offer pre tax retirement accounts such as a traditional IRA or a 401(k), and these can be appealing benefits to employees. Others offer pre tax health care benefits such as Section 125 Premium Only Plans or FSAs, which allow employees to set aside money for qualified medical expenses.
Be Equitable in Enrollment
When you’re offering pre tax employee benefits to your staff, it’s important that you are completely equitable in the process. If you decide to provide pre tax benefits to full-time employees, all full-time employees must be given the opportunity to enroll. Any discrimination — or simply the appearance of such — can land you in hot water with the Internal Revenue Service. This is because pre tax health benefit plans are included in Section 125 of the Internal Revenue Code, which outlines nondiscrimination requirements.
Maintain Compliance With Laws
Section 125 isn’t the only standard you need to stay apprised of when you offer pre tax benefits to your staff. There are many specific guidelines that employers must abide by when they administer pre tax benefit plans for employees. Like any other law, though, these standards are subject to change and are indeed revised frequently. How can a company be sure that its plans remain compliant with all of the applicable regulations? It’s a good idea to have a dedicated representative in human resources who manages these accounts.
Outsource Benefits Management
If you’re feeling overwhelmed by all of the red tape and requirements associated with pre tax benefits, you’re not alone. It can be a challenging field to navigate. That’s why many companies opt to outsource the management of pre tax benefits to a third party. In such cases, a payroll management company can assume the responsibility and absorb liability for compliance, too. This is a great option for businesses that want to offer attractive pre tax benefits packages without incurring risk.
About Haughn & Associates
Founded by Michael Haughn in 1986, Haughn & Associates is a full-service, family-owned, independent insurance agency based out of Dublin, Ohio. H&A strives to provide the best possible price and unique insurance solutions across a myriad of industries, including construction, IT, Habitation & Commercial Property, Agriculture, and Engineering. Devoted to providing the best of business insurance, life and disability insurance, personal insurance, employee benefits, and bonds, H&A is proof that success lies in long-standing client relations and satisfaction. To learn more about how H&A can be of service to you, contact us at (877) 802-2278.
