Employee Benefits Programs

We’ll help you consider your budget, business goals, and resources when planning and implementing your employee benefits program.

Your employee benefits program can play a key role in attracting and retaining quality employees. When planning and implementing your benefits program, be sure to consider your budget, business goals, and the resources that will help you comply with federal and state guidelines.

Employee Benefits Programs for Business Owners

As you develop your program, it is also vitally important to understand the laws which can potentially impact your employee benefits program, including:

  • COBRA if your company has 20 or more employees
  • The Affordable Care Act (health care reform)
  • Family and Medical Leave Act if your company has 50 or more employees

Types of Employee Benefits

There are two types of employee benefits:

  • Those the employer is required to provide by law
  • Those the employer offers as an option to compensate employees

Examples of required benefits include Social Security and workers’ compensation, while optional benefits include health care and retirement. Both required and optional benefits have both legal and tax implications for the employer.

Legal Compliance

While employers have discretion to choose what benefits to offer their employees, and how, employee benefits are also highly regulated by law. Thus, as employers explore the Employee Benefits section, they should keep the following in mind:

  • Which benefits must be provided by law to employees, such as family and medical leave and continuation of health coverage, and which benefits are voluntary
  • For each benefit, determining who is a covered employer, and who is a covered employee, keeping in mind whether your workers are properly classified as independent contractors or employees
  • Knowing whether the benefits you provide are regulated by federal and/or state law. For example, health coverage and retirement plans, while optional, are both governed by the federal Employee Retirement Income Security Act (ERISA). Health insurance is further subject to a variety of other federal laws, including the recently enacted Patient Protection and Affordable Care Act, and state laws that add to or expand federal law.

Employers should understand the tax consequences of employer-provided benefits, such as:

  • Cafeteria Plans
  • Fringe Benefits
  • Health Care Reform
  • Health Insurance Health
  • Insurance-Related Laws
  • HSAs
  • FSAs and Other Tax-Favored Plans
  • Leave and Time Off
  • Mandated Disability Benefits
  • Medicare Retirement Plans
  • Retirement Plans

Each retirement plan has certain key elements. These include:

  • A written plan that describes the benefit structure and guides day-to-day operations
  • A trust fund to hold the plan’s assets
  • A recordkeeping system to track the flow of monies going to and from the retirement plan
  • Documents to provide plan information to employees participating in the plan and to the government

Employers often hire outside professionals (sometimes called third-party service providers) or, if applicable, use an internal administrative committee or human resources department to manage some or all of a plan’s day-to-day operations. Indeed, there may be one or a number of officials with discretion over the plan. These are the plan’s fiduciaries.

Plans with IRAs:

  • Participant’s retirement benefits based on participant’s account balance
  • Some plans may allow employees to contribute
  • Depending on the type of plan, employer may be required to make annual minimum contributions
  • Contribution limits of $5,000 to $49,000, depending on the type of plan
  • Depending on the type of plan, must cover some or all of the employees in all your businesses
  • Easy to set up and operate
  • No annual return required
  • Annual nondiscrimination testing not required
  • Little design flexibility
  • No loans allowed
  • Immediate vesting of all contributions

401(k) and Profit Sharing Plans:

  • Participant’s retirement benefits based on participant’s account balance
  • May allow employees to contribute through salary deferrals
  • Depending on the type of plan, employer may be required to make annual minimum contributions
  • Contribution limits
  • Must meet minimum coverage tests but can exclude some employees
  • More complex to set up and operate
  • Annual return usually required
  • May require annual nondiscrimination testing
  • Greater design flexibility
  • Loans and hardship withdrawals allowed
  • May delay vesting of some employer contributions

Defined Benefit Plans:

  • Participant’s annual retirement benefit determined by the plan’s benefit formula
  • Higher annual retirement benefits possible
  • Actuary required to determine employer’s annual contributions
  • Must meet minimum coverage tests but can exclude some employees
  • Most complex to set up and operate
  • Annual return required
  • Annual nondiscrimination testing required
  • Greater design flexibility
  • Plan may allow loans
  • May delay vesting of participants’ accrued benefit

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