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What are the Benefits of Sponsoring a Reimbursement Plan?


There are several significant benefits to sponsoring a reimbursement plan. They include:

  • Tax Savings for Your Company

In any reimbursement plan, all contributions made by the employer are non-taxable dollars. This saves your company a significant amount in Federal, FICA, FUTA, Workers' Compensation, and some State income taxes.

For example, a company with 50 cafeteria plan participants might save:


 
Expenses Before Cafeteria Plan
Expenses After Cafeteria Plan
Annual Payroll $1,500,000 $1,500,000
Employee (EE) Paid Medical Premiums - 0 - 75,000
EE Before-Tax Medical Expenses - 0 - 50,000
EE Before-Tax Dependent Care Expenses - 0 - 25,000
Taxable Payroll $1,500,000 $1,350,000
FICA Taxes (7.65%) - 114,750 - 103,275
Annual Savings
$11,475 per year!

  • Savings for Your Employees

Any contributions made to a reimbursement plan by the employer are non-taxable dollars to the employee as well. These amounts are a substantial benefit to employees for medical, dependent care, and transportation expenses. However, with a Cafeteria Plan, your employees save an additional amount in Federal, FICA, and some State taxes.

For example, an employee with a moderate income might save:


 
Income Before Cafeteria Plan
Income After Cafeteria Plan
Adjusted Monthly Salary $3,000 $3,000
Before-Tax Medical Expenses - 0 - 100
Before-Tax Dependent Care Expenses - 0 - 300
Taxable Salary $3,000 $2,600
Taxes - Federal & Social Security - 750 - 650
After-Tax Medical Expenses - 100 - 0
After-Tax Dependent Care Expenses - 300 - 0
Net Monthly Salary $1,850 $1,950
Monthly Savings $0 $100
Yearly Savings
$1,200!

  • Offering a Stronger Benefit Program

An attractive and comprehensive benefit package can be an invaluable aid to your company. Not only does it increase employee satisfaction, in turn improving employee productivity, it can substantially decrease hiring and training costs by lowering turnover and increasing company loyalty.

For more information on how to show the true value of your employees' total compensation package to them, visit myBenefitStatements.com.