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Flexible Benefits
Editor's Note: Flexible benefit plans: a win-win for employees and employers.
Overview: Flexible benefit plans allow employees to choose from a variety of benefits offered through the employee benefit program. Choices often include health insurance, retirement plans and reimbursement accounts that can be used to pay for either out of pocket health or dependent care expenses. Flexible benefit plans allow employees to choose the benefits that are important to them at a particular stage of life.
Flexible benefit plans provide a tax advantage for the employee as well as the employer. Employees contribute to the cost of their benefits via a pre-tax payroll deduction. Using pre-tax income to pay for benefits provides employees an opportunity to reduce their taxes. Employer contributions are tax deductible.
There are a number of flexible benefit plans an employer can offer including:
- A premium-only plan (POP) allows employees to pay for premiums using pre-tax dollars. This is the simplest form of flexible benefit plan and the easiest to administer.
- Full flex plans offer employees a choice between cash and qualified benefits. Employees use benefit credits to purchase their benefits from a variety of different options.
- Flexible spending accounts (FSAs) allow employees to set aside pre-tax dollars to use to reimburse themselves for qualified medical or dependent care expenses. FSAs are usually offered with a POP.
Trends: Flexible benefit plans are just that….flexible! Flex plans allow employers to adapt their benefits in response to ever changing economic and demographic challenges. Many flex plans are responding to rising health care costs and a demand for greater work/life balance, by incorporating wellness initiatives and an option to purchase additional time off into their benefit options. Shifts to more diverse workforces will more than likely present additional opportunities to expand these plans.
Tracy Morley, SPHR, Legal Editor
Latest items in Flexible Benefits
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Taxation of Employee Benefits
Employee benefits, such as health insurance, sick pay, disability pay, workers' compensation insurance and retirement savings plans, may be subject to withholding for federal income taxes (FIT), Social Security and Medicare (FICA) taxes or federal unemployment (FUTA) taxes. This section assists HR professionals in understanding how each particular type of benefit plan must be structured and how to properly tax and report contributions, reimbursements and distributions in order to ensure compliance with the Internal Revenue Code.
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What plans are subject to the $2,500 annual limitation provision of the ACA?
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Does the $2,500 annual limit on contributions to an FSA include the employer's contribution?
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Health Care Benefits
Employer-sponsored health care benefits are an important part of the overall compensation package used to attract and retain employees. Employers, however, face a number of issues when deciding on employee health care benefits. This section assists HR professionals in understanding the different types of benefit plans (e.g., traditional indemnity, managed care), the benefits that may be offered (e.g., prescription drug, dental, vision), how cafeteria plans work and the impact of the Patient Protection and Affordable Care Act (PPACA).
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Are FSAs eligible for COBRA?
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Are over the counter drugs still considered an eligible expense under FSAs?
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Can employees change their FSA elections mid-year?
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FSA (Flexible Spending Account)
Employment glossary definition of FSA (Flexible Spending Account).
About this topic
HR guidance on the benefits of offering flexible benefit programs.
Flexible Benefits: Key Items
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Section 125 Flexible Benefit Plans
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Cafeteria Plans
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What plans are subject to the $2,500 annual limitation provision of the ACA?
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Are over the counter drugs still considered an eligible expense under FSAs?
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What Employers Should Know About the Affordable Care Act (ACA)
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Health Care Reform Timeline - Chart