The Internal Revenue Code Section 125 allows employers to give their employees the option to pay certain out-of-pocket expenses on a pre-tax basis. Expenses include:
* Group insurance premium contributions (medical, dental, term life and disability)
* Professional medical expenses which are not reimbursed by insurance
* Daycare expenses for legal dependents which allow the employee and spouse to work
Employee contributions toward the non-taxable benefits offered in the plan are free of federal income tax, FICA tax, state income tax in most states, and FUTA tax. Employers save by not having to pay the matching FICA tax on employee contributions.
Any municipality, large or small, that is a member of the VLCT Health Trust can adopt a plan. Any employee may participate in a plan, subject to eligibility requirements established by the employer with the exception of partners in a partnership, sole proprietors, and owners who own 2% or more of an S-corporation.
Just place a call to the VLCT Member Relations division (800-649-7915) and a representative will assist you in designing a plan.
Appropriate documentation, enrollment forms, and employee communication materials will be developed to establish the plan in accordance with IRS guidelines and effectively communicate the plan to your employees.
Ongoing administrative services will be provided to ensure your plan stays in compliance.
Any employer who requires employees to contribute to the cost of an employer-sponsored health or dental insurance policy should offer a Premium Conversion Plan. This plan allows the contribution to be deducted from the employer's gross wages pre-tax, rather than from the net wages after tax. This simple payroll change allows the employee to avoid paying federal, FICA, and state tax on the contribution. The employer saves by not having to pay the matching FICA tax on the contribution.