Benefits for
You, Your Employees, and Your Business
Employee benefits are a popular topic today. Employees are beginning to place more value
on employer-provided benefits and salary is no longer the only determining factor when an
applicant accepts or declines a job offer. Employees are also interested in benefits ---
life, health, disability, retirement.
You're probably interested in benefits, too. As a business owner, you'd like to provide
benefits for yourself ... and your employees ... while benefiting your business, too.
Advantages To The Employee
Employer benefit plans provide employees with coverage they may not have purchased on an
individual basis. These benefits are usually provided at little or no cost to the
employee. In addition, some benefits are also available for the employee's spouse and
children.
Any employee costs associated with the benefit plan are usually collected through
convenient payroll deduction plans. Payroll deduction allows employees to pay monthly,
rather than annual premiums, and saves them the cost and hassle of writing checks.
Advantages To The Business Owner
Benefit plans also provide many business advantages. They help attract and keep valuable
employees. In today's competitive job marketplace, a good benefit plan can make the
difference between hiring or losing qualified job applicants.
Benefit plans also boost employee morale and provide a sense of security. Employees
appreciate the benefits you're providing. They know they're covered in case of a medical
emergency --- or if they become disabled.
Benefit plans may provide a current tax deduction for the business. Or there may be a tax
deduction available when the benefits are paid out. Some plans include future cost
recovery provisions.
Qualified vs. Nonqualified
There are two major categories of benefit plans --- qualified and nonqualified.
Qualified benefits are regulated by the Internal Revenue Service and the
Department of Labor. Qualified plans must be approved by the IRS and comply with
nondiscrimination, funding and reporting requirements. Your business receives a current
tax deduction for premiums paid, within limits. Plan participants are not taxed on life
and health plan premiums and benefits, within limits, and are usually allowed to defer
taxation on retirement plan contributions until withdrawn.
Nonqualified benefit plans are more flexible because they aren't regulated as
strictly as qualified plans. Unlike qualified benefit plans, you, the employer, can pick
and choose which employees you want to cover in the plan. That's why nonqualified plans
are sometimes called "executive benefits." Executive benefit plans can provide
either a current tax deduction or future cost recovery features.
Which Plan Is Right For My Business?
That's a good question. Many businesses find that a combination of the two work best
— a broad plan covering all employees and a supplemental plan covering only
"key" people.
Each business and business owner is unique. You should decide which benefits you want to
provide, evaluate your current benefit plan, and then adjust your plan to fit your needs.
The best plan is a plan that meets your objectives — for your employees, your
business and you.