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Why should a business have a flex plan?

Why would employees want a flex plan?

Can any form of business have a flex plan?

Must a business be a certain size to have a flex plan?

What are the differences between flex and cafeteria plans?

When can a plan be established?

What benefits can be included?

What anti-discrimination rules apply?

What is the difference between "in-house" and "out-sourced" plan management?

Why should a flex plan be independent from insurance?

What are employer risks in establishing a plan?

What are employee risks in participating?

What are the federal reporting requirements for flex plans?

What is the effect of your flex plan on other benefits?
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Why should a business have a flex plan?

To increase profits!

  1. Without a flex plan, businesses are forced to provide the "richest" insurance they can('t) afford to get good coverage--with flex they can use medical FSAs to team up with their core insurance plan to provide 100% coverage.
  2. Without a flex plan, all employee paid benefit expenses must be paid with taxed dollars--with a flex plan, they can be paid pre-tax; savings $$ for the employer as well as the employee.
  3. Without flex employees cannot tailor their benefits to their wants making benefit high cost but with reduced value--the ability to customize benefits dramatically increases value to employees.

Why would employees want a flex plan?

To increase spendable income!

  1. Without a plan, they must spend taxed dollars on premium and out-of-pocket medical, dental, vision and daycare expenses--with a plan these can be paid with pre-tax dollars.
  2. Without a plan, they must buy more and more high cost insurance to get the coverage they want--with a plan, they can use low cost "flexible spending accounts" to expand their coverage to 100% of expenses.
  3. Without a plan, benefits are wasteful one-size-fits-all--with a plan they can pick and choose only that benefit coverage they desire. They get greater value for each benefit dollar.

Can any form of business have a flex plan?

Yes, but only the "employees" can participate, not partners, S-Corp owners, or proprietors. Owners of LLCs are not employees. These owners have other ways to benefit since they receive the value of the employer tax break from flex. C-corp. owners can be employees and, therefore, participate.


Must a business be a certain size to have a flex plan?

No. Businesses as small as 5 employees have successfully implemented a plan. Because of anti-discrimination rules, it becomes more difficult (but, not impossible) for owners to participate as size drops below five. Micro-sized non-profits have an easier time passing these tests.


What are the differences between flex and cafeteria plans?

None. As you work with Benefit Innovations, Inc. and read "Bottom Line Benefits," you'll understand that all plans operate under the same laws and regulations. They only differ in the number and kind of benefit options provided and the methods of contributing to the cost of benefits. Benefit Innovations, Inc. and our FlexWorks™ system can design and manage all plans from the simplest to the most sophisticated.


When can a plan be established?

At any time. Each plan must establish a "plan year" (any 12 month period) but the first year can be short to bring the flex plan year into agreement with the calendar or fiscal year.


What benefits can be included?

Typical benefits include “health and accident plans” such as disability and medical related insurance and medical Flexible Spending Accounts (FSAs), group term life insurance, dependent care FSAs, adoption assistance, 401(k) plans, and optional vacation days.

The law currently prohibits flex plans from including educational assistance and long term care insurance plans and transportation benefits. But, transportation plans are quite similar to flex plans, Benefit Innovations, Inc. can assist with these plans.


What anti-discrimination rules apply?

Plan may not discriminate in favor of the highly compensated and owners and officers may not elect more than 25% of the total plan benefits. Some plans included within your flex plan may have their own rules. Benefit Innovations, Inc. has developed, for its clients, plan design methods that minimize the effects of these rules.


What is the difference between "in-house" and "out-sourced" plan management?

Very little. When you work with Benefit Innovations, Inc., both options are available and both are complete, professional services. Our “out-sourced” services provide our staff to manage claims and reimbursements. Our “in-house” services, FlexWorks™, provide you software that will manage these processes for you, in your “shop,” in a few minutes and with great simplicity. The low cost and simplicity of self-administration often makes it the right choice.


Why should a flex plan be independent from insurance?

Businesses put their energy into their profit centers. Insurance agencies and carriers make their profits from insurance sales—not flex. Benefit Innovations, Inc. is independent and our profits come from flex—that’s where all our resources and energy are focused. Our independence makes your plan independent from insurance—you’ll profit from our profit.


What are employer risks in establishing a plan?

They stem primarily from the requirement that medical FSAs pay claims up to the full annual amount elected by employees, regardless of the current balance in their accounts. This could (but usually doesn’t) create some risk if an employee terminate before their contributions equal claims paid. Employer tax savings and risk management techniques used by Benefit Innovations, Inc. minimize this risk.


What are employee risks in participating?

The primary risk is affectionately called the “use-it-or-lose-it” risk. All benefits must be fully used before the end of the year—unused portions are forfeited at that time. It means that insurance companies cannot return premiums paid in in excess of claims paid and that spending account contributions are not refunded if not fully used. Benefit Innovations, Inc. provides the assistance required to minimize this employee risk. But, should it materialize, the “gain” can be used to offset any employer risk, should it materialize.


What are the federal reporting requirements for flex plans?

The primary report is an annual Form 5500 (an informational return) which Benefit Innovations, Inc. prepares for its clients. In addition, W-2’s must reflect taxable income that is lower by the employee’s elections and a daycare information box must be completed.


What is the effect of your flex plan on other benefits?

The general effect is positive because flex may help you reduce other benefit costs.

But, there may be an effect on pensions. As employees make “salary reduction” contributions to the various flex plan benefits you offer, their taxable income will be lower. You may want to make sure that income definitions in pension plans include the salary reduction amounts in flex to insure that the largest possible contributions levels are permitted in your pension plan(s).

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