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Questions about Employee Group Benefits?
What are Employee Benefits?
Employee benefits are various non-wage compensations provided to employees in addition to their normal wages or salaries. Employee benefits might include medical, prescription, vision and dental plans; health and dependent care flexible spending accounts; retirement benefit plans (pension, 401(k), 403(b)); group-term life and long term care insurance plans. Companies who offer these types of work-life perqs seek to raise employee satisfaction, corporate loyalty, and worker retention by providing valuable benefits that go beyond a base salary figure. Normally, employer-provided benefits are tax-deductible to the employer and non-taxable to the employee. The purpose of employee benefits is to increase the economic security of staff members, and in doing so, improve worker retention across the organization.
What are the tax benefits?
Some fringe benefits (for example, accident and health plans, and group-term life insurance coverage up to US$50,000) may be excluded from the employee’s gross income and, therefore, are not subject to federal income tax. Some function as tax shelters (for example, flexible spending accounts, 401(k)’s, 403(b)’s). Fringe benefits are also thought of as the costs of keeping employees other than salary. These benefit rates are typically calculated using fixed percentages that vary depending on the employee’s classification and often change from year to year.
What are Cafeteria Plans?
Corporations may also offer cafeteria plans to their employees. These plans would offer a menu and level of benefits for employees to choose from. In most instances, these plans are funded by both the employees and by the employer(s). The portion paid by the employees is deducted from their gross pay before federal and state taxes are applied. Some benefits would still be subject to the Federal Insurance Contributions Act tax (FICA), such as 401(k) and 403(b) contributions; however, health premiums, some life premiums, and contributions to flexible spending accounts are exempt from FICA.
Saturday: By Appointment
Insurance Agency, LLC
2916 Pine Grove Avenue
Port Huron, MI 48060
Phone: (810) 984-1373
Fax: (810) 984-1384
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