You Will Increase Your Profit and Your Employee Moral By Reading This Blog
Yep, you will.
What, you want the details of this too-good-to-be-true offer? Why, just a couple of weeks ago I wrote a blog that says don’t believe anything that sounds too-good-to-be true.
But you can trust me, can’t you?
After all, I predicted the Mets would win the World Series this year (and last year). You can believe me.
So here is the plan. I am working on a new employee benefit package for one of my consulting clients and introduced the company to a Flexible Spending Account. This is one of the greatest benefits that has ever been created by the US Congress. (What is the opposite of progress?….It is congress, yuk, yuk, yuk)
It is simple—your employees put aside a fixed amount of money, from $100 to $2500 annually, through payroll deduction. This reduces their tax bite. For instance, Gary Glazier puts in $100 a month, he saves roughly 20-25% (based on his individual tax status), or about $240-$300 per year. He gets to spend the entire $1200 on prescriptions, doctor’s co-pays, medical devices, and a whole list of eligible items from band-aids to eyeglasses. (Google ‘FSA Eligible Expenses’ to see complete lists of allowed items)
Now it’s your turn. Because the employees reduce their taxable income, you reduce your tax bite as well. You will save 7.65% on each dollar of payroll placed in the plan. $76.50 for every thousand of payroll. This is the FICA plus the medicare tax.
You save, the employee saves and your employees are happy that you have created this plan for them. It is a no-lose for all. Except, there is some fine print. You will incur a one-time set up fee and have a small monthly cost for the plan. The company I just set up has twenty-two employees, incurred first year fees of $1800, and will continue to have fees of about $800 per year. They will be saving about $4300 per year, and their employees think this is the greatest thing since peanut butter.
If any employee spends their full amount before the end of the year, and leaves you, you will be on the hook for the difference, and if an employee doesn’t spend their full amount, you gain the difference. These are usually offsetting in most companies.
Here is the most important thing…talk to your insurance agent or your payroll company to set this up. You can shop around on the net, but professional advice is best. There are options that cover dependent care (like child care while you are working) or elder care, if you take care of your parents. In these cases, the $2500 limit can be raised. You can also set up a plan that pays employee commuting expenses, like bus, train or parking expenses. Remember, each time the employee saves, you save too. There are different ways for the employee to spend the money; look for one that gives each employee a debit card and requires no paperwork. That will be the easiest for you to manage.
If you are providing a plan like this to your employees, you probably have not read this far. So, if you are still reading, think about this for January first. I guarantee that after your insurance agent describes it to your employees, they will love it. Now is the time to set it up.