Employee Benefits - Creating the Right Package

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Provided by Sigma College of Small Business, Inc.

Employee BenefitsCreating the Right Package

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Copyright 2010, Sigma College of Small Business, Inc.2

Introductions

Keynote TopicEmployee Benefits

Creating the Right Package

Our Sponsor:Freeman & Sherburne

Keynote ConclusionEmployee Benefits

Creating the Right Package

Break – Refreshments and NetworkingAsk

Questions Any Time

Agenda

Employee Benefits ‐ Creating the Right Package

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Copyright 2010, Sigma College of Small Business, Inc.

Value of a Benefits Package

• Tax advantages– Use pre‐tax dollars to pay– Example

• Find and keep a better work force– Competing for talent– Cost of turnover– Cost of an “unhealthy” work force

• The “Right Thing”

3Employee Benefits ‐ Creating the Right Package

What would you do if a valued, uninsured employee had a major

medical issue?

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Health Insurance Confusion


Types of Plan• Group or Individual

• Managed or Fee for Service

• HMO, PPO, POS

Coverages• Preventative Care

• Hospitalization

• Prescriptions

Costs• Premium

• Co‐Pay

• Deductible

• Max Out of Pocket

Networks• In network

• Out of network

• Available physicians

Amount of Coverage• Mix of employer to

employee

• Vision, Dental

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Comparison of Types of Coverage


MonthlyPremium

Plan “Out of Pocket”(Copays, Deductibles, Out of Network)

High Deductible

PPO

Fee‐for‐Service(Indemnity)

HMO

POS

Group Plan• “Risk” averaged across company• Requires minimum enrollmentIndividual Plan• “Risk” is for individual and family• Typically less expensive

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Costs

• Premium– Monthly payment– Typically shared between employer and

employee• Co‐pay

– Standard “per‐visit” amount paid• Deductible

– Amount paid before insurance “kicks in”– Deductibles are for individual family members

• Maximum Out‐of‐Pocket– Maximum amount that will be paid by individual– Typically less than combined deductibles


Consider all costs when determining the right

package for you and

employees.

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Total Cost ExampleBusiness owners need to look at and have their employees consider the “total cost” of the plan.


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Paying the Out‐of‐Pocket

• Flexible Savings Account – FSA– Pre‐tax dollars for out‐of‐pocket medical– Determine amount to be withheld from pay– Use it or lose it

• Health Savings Account – HSA– Employee and Employer contribute pre‐tax– Contribute at will – can change amount– Owned and moves with employee

• Health Reimbursement Arrangement – HRA– System for employer to reimburse out‐of‐pocket– Pre‐paid cards used by employees then paid by employer


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Designing the Plan

• What type of plan– Managed currently offers best pricing– High deductible with HSA becoming popular

• How much to pay– Remain competitive in line with other

objectives– Consider tax benefits

• Add ons– Dental, Vision

• Changing plans– How to approach rising costs

• Health Care Reform – what will it mean?





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Retirement PlansTypes and Terms

• Qualified v. Non‐qualified– Qualified is pre‐tax and tax‐deferred

earnings• Time and Cost to Administer

– Forms and third parties required to start and administer the plan

• Contribution Limits– Limits on the amount that employees and

employers can and/or must contribute• Highly Paid Employee

– Qualified plans have rules to prevent discriminatory practices and disproportionate contributions

– Safe Harbor


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Retirement PlansIRA Based Plans 401(k) Based Plans Other

PayrollDeduct IRA

SEP IRA SIMPLE IRA 401(k) Safe Harbor401(k)

Profit Sharing

Key Difference

Employee only contribution

Employer only contribution

Employee contributes, Employer matches

Higher limits Contribution requirements, no test for discrimination

Discretionary annually, must offer to all

Contributors Employee Employer Both Both Both Employer

Max Annual Contribution

$5,000 25% NTE$45,000

Ee ‐ $10,500Er – Match to 3%, or 2%

Ee ‐ $15,000Co – 100% of comp NTE $45,000

Ee ‐ $15,000Co – 100% of comp NTE $45,000

Set annually

ContributorOptions

Ee can decide at any time

Er can decide year to year

Ee can contribute,Er must match

Ee and Er can contribute

Ee can contribute, Ermust match

Er accordingto plan terms

Vesting Immediate100%

Immediate 100%

Immediate 100% Ee – Immediate 100%Er ‐ optional

Ee and most Er‐Immediate 100%

According to plan terms


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Disability

• Pays when a medical condition prevents working– Most working adults are more likely to

become disabled than to die• Short Term Disability

– Effective for several months (typically 180 days)

– Percent of salary• Long Term Disability

– Becomes effective after a specified waiting period

– Amount and waiting period affect premium


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Additional Benefits

• Life Insurance

• Vacation

• Sick Days

• Holidays

• Education

• Voluntary Programs


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Critical Business Areas

Strategy and Planning

Marketing and Sales

Accounting and Finance

Operations and Quality

Leadership and Administration

Technology and Innovation

Sigma College of Small Business

• Focus Workshops– YouTube: Grow Your Business with Online

Video• Tuesday, May 18, 2010

• 9am – 12pm, $99

• Upcoming SigmaFree Classes– 5/18 – No Class

– 5/25 – Business Networking for the Non‐Networker

– 6/8 – What’s the Best Entity? Solve the Mystery of Legal Organization

15Dedicated to the Learning Needs of Small Business!




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