Cafeteria Plan refers to a section of the Internal Revenue Code that allows employers and employees to save thousands of dollars in the previously untouchable area of payroll taxes. This program can also add new benefits at no cost on a before tax basis.
The Cafeteria Plan is a non-traditional benefit program which you may sponsor for your employees. It allows employees to elect to have their out-of-pocket cost for qualified items (insurance premiums, daycare and unreimbursed medical expenses), which they may incur during a given plan year, to be set aside from their pay on a pre-tax basis. The federal and state income tax as well as social security tax is saved by the employee on the total amount they elect. To the employee, this means they would be receiving a raise, in the form of a lower tax withholding from their pay.
Not only does a Section 125 Cafeteria Plan benefit the employee but the employer as well. The way the plan works, is that every dollar that escapes taxation on the employee side also is no longer subject to the employer's contribution, and associated payroll taxes. This means big savings every payday for employers too. Savings Example
Premium Only Cafeteria Plans
A Premium Only Cafeteria Plan is a way to pretax employee's contribution to the employer's health insurance or other insurance plans. The employer is responsible for administration of the plan and supplying information to First Concord Benefits Group. We provide the plan documents and summary plan descriptions as well as enrollment forms. We also prepare the annual 5500 Form and discrimination reports as required by the IRS. The employer would be responsible for accounting and supplying First Concord Benefits Group with the required information.
Full Cafeteria Plan Administration or Defined Benefit Plans
Section 125 Cafeteria Plans offer benefits beyond just tax savings. By offering a full benefit package, or Full Cafeteria Plan, an employer can define a dollar amount to be given to each employee to spend on benefits and by so doing, lock in the employer's cost of benefits. In other words "defined contribution" versus the traditional "defined benefit" type of plan. Once the benefit costs have been fixed on this basis, a booklet or list of benefits with prices can be published. Since the employer's benefit costs are fixed, based on the dollar amount allotted to each employee, this booklet of benefits can offer a large number of items that go far beyond what could be made available under a traditional benefit plan. This type of administration allows the employee to pick and choose the benefits that meet their family's needs.
Partially Self Funded Medical, Dental, Vision and Short Term Disability Plan Administration
Health care costs have been out of control in the United States for some time. Double digit inflation in the medical field is reflected directly in insurance rates.
Because insurance companies have failed to adequately respond to this issue, self funding and partial self funding of medical, dental, vision and short term disability plans have been developed as a way for employers to directly manage costs and control benefit plans.
Self funding has been used by large employers for many years but was never practical for small firms. With the development of self funding and partial self funding techniques, this method of cost control is now available to almost all firms, regardless of their size or number of employees.
With the aid of your Third Party Administration (T.P.A.) Firm, First Concord Benefits Group, LLC, a plan of health or other type of employee benefit program is selected for self funding. Quite often, this new self funded plan has a level of benefits that is identical to your present plan. The only difference being that there is no longer an insurance carrier involved unless the risk is so large as to require a reinsurance company.
This method of self funding allows the employer to accept only the risk they feel comfortable with and lets the reinsurance carrier cover the balance. The more risk the employer carriers, the greater their potential for savings. It is possible in many cases to self fund part of a program of health insurance without the employer having to take any risk. In some cases, this can be achieved without changing the employer's current insurer, but just the plan of health coverage and benefit limits. We at First Concord Benefits Group can eliminate the employer's risk by adjusting the employer's self funding level of claims and by arranging for reinsurance coverages.
Self Funded Dental and Vision Identification Cards
One of the most attractive features of the self funded dental and vision plans is the simplicity of operation. The employee and covered dependents visit the dentist or eyecare specialist of their choice, then they either pay the bill or submit it to First Concord Benefits Group for payment, based on the benefit levels of the plan. These costs are usually small enough that an employer can allow employees to select the provider of their choice, thus placing the responsibility for the best use of limited dollars available on the employee. Additionally, employees are involved in the cost containment process with cost-sharing provisions such as annual maximums and co-payments.
Self funding of dental has been strongly supported by the American Dental Association as a cost-effective way to provide dental cost assistance to employees while protecting their right to be treated by the dentist of their choice.
When a self funded dental or vision plan is established, an identification card is prepared for each covered employee and their dependents. This card shows the coverage and benefits payable. See examples below:
Custom Consolidated Billing Services
First Concord Benefits Group can make offering voluntary payroll deduction insurance plans easy for everyone involved with our "Custom Consolidated Billings Services". Even if multiple plans are to be offered from several different insurance carriers, First Concord Benefits Group can put it all on one billing. Each month, the employer needs to only write one check to First Concord Benefits Group and in turn, we will pay each carrier, accounting for any adjustments as needed. See Sample Consolidated Billing
First Concord Benefits Group supports you with customized proposal services. We put the proposal together exactly the way you want the information displayed. This can be done in text or with pictures and charts, but always in full color.
This allows for a better understanding of all aspects of every plan considered. Upon request, we will be available to review any proposal we prepare with any interested party to include the Broker, Employer, or Employee.
Individual One-on-One Enrollment Services
First Concord Benefits Group maintains a staff of highly trained and licensed enrollment specialists. These individuals are in many cases bi-lingual and/or have professional designations beyond a four year bachelors degree. It is their objective to conduct enrollments on the basis determined by the employer and broker as quickly as possible, but in a very thorough and professional manner. In the final analysis, the overall success is measured by how well the enrollment goes.
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