Flexible Benefit Plan
Flexible Benefit Plans (sometimes called cafeteria plans) allow your employees to pay family health, dental, eye, prescription and day care costs with tax free monies.

Most small employers in the past have been reluctant to consider flexible benefit plans because of the paperwork, accounting, and charges.

Your Saratoga County Chamber has arranged a plan for LLC’s, partnerships, and corporations to address these concerns.  The net cost to the employer can be zero.  The paperwork and documentation is done outside your offices.  And at the end of the year, the firm is presented all the documentation to give to its CPA.

Your employees save state income tax, federal income tax, and FICA tax on all monies set aside to pay the costs mentioned in paragraph one.  As an employer you save on FICA tax for monies set aside by the employee.

When you initiate the plan, the employee sets aside monies in three separate funds:

  Fund 1  -  employee contributions to health or dental insurance
  Fund 2  -  misc. expenses (outlined below)
  Fund 3  -  child or parent daycare, child vacation camp, pre K

The monies set aside in each fund cannot be moved to another fund during the year.

Fund 2 will cover co-pays, deductibles, prescriptions, over the counter medications, contact lens, eyeglasses, exams, braces, orthodontics, fillings, daycare, parent elder care, child summer camp, nursery care, pre K, and even parking fees at work.  Expenses for the entire family are included.

Prior to the end of the calendar year, you and your employees will be notified of how much remains in the individual employee funds.  If there is excess money in the miscellaneous fund at yearend, an employee can get teeth cleaned, purchase over-the-counter drugs, buy safety shoes, etc.  This way the “use it or lose it” clause is not a fear.

As an employer you explain the general plan and specific questions are answered by the processing company.  Once the employees decide how much they want in each fund, they fill out a form which is sent to the processing company.  As the employer you deduct their set-asides from their gross annual pay.  Then, each month you send 1/12 of total monthly set asides of all participating employees to the processing company.  That ends your administrative responsibility.

All claims and questions go to the processing company directly from the employee, and payment is made directly to the employee within two weeks.  All the employee does to collect their reimbursement is complete a very simple one-page form and send it to the processing company along with receipts.

If an employee leaves the company her/his participation ceases immediately.

The employer sets criteria for employee participation in the plan.  That could be a minimum number of years on the job, a minimum number of hours worked per week, or a maximum amount an employee may set aside.  There is no minimum employee participation level required, and the plan can be cancelled at the end of a year.

The cost to the employer is less than $5.00 per month per participating employee.  That means if an employee sets aside $750 per year to cover all three funds, it is approximately a net zero cost to the employer.

Many employees view the plan as a tax free vacation/Christmas/savings plan.

As the employer your participation will be determined by the participation level of your employees.

If you have questions or need further information call Joe Dalton at 584-3255 or email jdalton@saratoga.org.