This time of year is when discussions about next year’s benefit plans start. Healthcare plans can often be one of the largest expenditures for employers but with the right strategy and evaluation that investment can be maximized and employer taxes can be reduced. Benefit plan decisions cannot solely be based on the costs of the plans. The wrong plan designs could cause top performers to become disgruntled; lower paid employees to look for coverage under Obamacare, which leads to employer penalties; and potential future candidates to view a compensation package as less lucrative. The right plan designs will not only help you to attract and retain top performers but can help maximize benefit plans while reducing costs. Think about three main ideas this year when evaluating your benefit plans for the New Year.
1) Don’t underestimate the benefit of incorporating a pre-tax health savings account.
These accounts allow employers and employees to put money into accounts on a pre-tax basis. In doing so, employees reduce their taxable income and employers can reduce their employer and FICA taxes. These accounts are easily administered while also creating a method for sharing benefit costs. These accounts are a great way to balance increased premiums and plan costs.
2) Go into your planning meeting expecting an increase in premiums.
If you go in expecting the increase then the cost of the plans won’t cause you to get fixated on that detail. Too often when the focus is on reducing or maintaining current costs, it can cause employers to make decisions that shift a great deal of that cost to employees. While our health industry today does require cost sharing between employees and employers, too much of a shift can cause an employer’s benefit plans to be viewed as not competitive by current or future top performers. Expensive plans that consume the cost of living increase an employee receives could cause employees and potential candidates to seek an alternative employer who can use their skills. All too often that can be a competitor. So, consider the cost impacts from the employee’s perspective and remember that benefit plans are offered as part of their total compensation package. This makes it part of your retention and attraction strategy.
3) Don’t forget that employees now have the option of the healthcare market exchange.
Not only can small businesses find health plans that may be cheaper through the Affordable Care Act but so can individuals. If the cost balance between the employer and employee shifts too much to the employee, the employees may research their options on the Market Exchange (Obamacare healthcare market). If an employer’s health plans don’t offer affordable and minimum value health coverage and an employee enrolls on the Market Exchange or receives a premium tax credit then the employer will be subject to a penalty of $2,000-$3,000 per employee. These fines are not tax deductible for employers like the healthcare tax credits.
Healthcare plans are expenditures but there are ways to design your plans to reduce your taxes, maximize your investment and strengthen your internal team’s motivation. Keep that in mind this open enrollment planning season.