Flexible Benefits

Editor's Note: Flexible benefit plans: a win-win for employees and employers.

Tracy MorleyOverview: 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.

Author: Tracy Morley, SPHR, Legal Editor

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