BASE^® Blog

The 125 Cafeteria Plans have nothing to do with food and everything to do with paying for qualified out-of-pocket health care expenses!  As we get closer to October, employers are looking into what health benefits they could be offering to their employees.  One of the most overlooked options for any business of any size is one of the four Section 125 Cafeteria Plans. 

The BASE® 125 Cafeteria Plan is like a menu of options that allows employers to customize the benefits they offer their employees.  They can offer their employees a way to help pay for their health care expenses, insurance premiums, or dependent care expenses on a pre-tax basis.  By utilizing BASE®, it will provide access to quality benefits, while providing a variety of affordable benefit options that stand alone or complement any health benefits package in place. 

There are four 125 Cafeteria Plans an employer can choose to offer:

1. Flexible Spending Account (FSA)
2. Limited Purpose Flexible Spending Account (LPFSA)
3. Dependent Care Assistance Plan (DCAP)
4. Premium Only Plan (POP)

All four options allow for the funds to be transferred on a pre-tax basis, allowing for both the employer and employee to see tax savings. 

With the BASE® FSA, the employees can use the funds they set aside to pay for their qualified, out-of-pocket health care expenses.  The employee has access to their full annual election on day one of the plan year for an FSA-eligible expenses.  

With the BASE® LPFSA, the employees can use the funds they set aside to pay for their qualified, out-of-pocket dental and vision expenses.  The employee, who has a Health Savings Account (HSA) in place, can use their LPFSA funds to pay for the dental and vision expenses while growing the funds in their HSA for other health care expenses now or in the future. 

With the BASE® DCAP, the employees can use the funds they set aside to pay for their qualified dependent care expenses.  The employee can still work and have peace of mind knowing they are establishing funds to help pay for a very significant cost to their family. 

With the BASE® POP, the employer does one simple payroll change that allows for the dollars from the employee’s salary to pay for the employee portion of the health insurance premiums.  The employee can save 25-50% on those premium costs by paying for their health insurance this way. 

Just food for thought… bottom line is this – adding in one, or all BASE® 125 Cafeteria Plans is money savings for both the employer and employee.  With BASE®, employees can see a 25-50% savings on every dollar they elect while employers can see savings on FICA withholding tax for every employee that participates.  The more your employees elect and save, the more tax-deferred dollars an employer can save in the long run. 

For more information on the BASE® 125 Cafeteria Plans, contact BASE® at 888.386.9680 or visit www.BASEonline.com.

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The only way for an employer to provide certain health benefits on a tax-free basis to employees is through a Cafeteria Plan.  One of the most basic and popular types is the Premium Only Plan (POP). 

The BASE® POP is an IRS-approved change in an employer’s payroll process that deducts the employee portion of the benefit premiums and turning it into non-taxable benefits. 

Once the POP is in place, the employees can start to pay for their share of their health premiums on a tax-free basis, allowing an employer to cut payroll taxes and increase the employees’ take-home pay. 

Check out the example below.

David runs his own company with 25 employees.  Without POP, his average pre-tax contributions are $0.  Taking $0 times the number of his employees, 25, giving him a total of $0 for annual pre-tax contributions.  Taking David’s total annual pre-tax contributions, $0, times the FICA taxes at 7.65% and his total annual FICA savings (estimate) for the year is $0.  But if David were to implement the POP into his company, he could save thousands of dollars in FICA savings.  With POP, his average pre-tax contributions are $3,000.  Taking $3,000 times the number of his employees, 25, giving him a total of $75,000 for annual pre-tax contributions.  Taking David’s total pre-tax contributions, $75,000, times the FICA taxes at 7.65% and his total annual FICA savings (estimate) WITH POP is $5,737.50.  By utilizing the BASE® POP to provide the legal documentation and guidance through the small change in payroll process, he has found over $5,000 that is now available for his business. 

The BASE® POP benefits both the employer and employee by reducing how much they have to pay in taxes.  The employer also can add value and savings to their benefit package, creating a more competitive benefit package.  Depending on the employee’s family income, the employee can save 25-50% of their payroll deductions. 

For more information on the BASE® Premium Only Plan (POP), contact BASE® at 888.386.9680 or visit www.BASEonline.com.

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In recent years, businesses are finding that offering a traditional group health plan doesn’t work.  Whether it’s because it is too expensive, it’s too complex for their business structure, or the one-size-fits-all doesn’t meet their needs.  No matter the reason, another HRA has emerged as a great alternative. 

The Individual Coverage Health Reimbursement Arrangement (ICHRA) gives employers of any size the ability to reimburse their employees for their qualified individual insurance premiums or insurance premiums and non-insured health care expenses.  Employers can choose to offer to all employees or to specific classes to fit any budget. 

The BASE® ICHRA is an IRS-approved tax savings plan that allows employers to offer a more personalized health benefit.   Employers can set a budget and create some predictability when it comes to health benefits, while providing a medical benefit without paying group benefit rates.

To start, the employer must decide which employees are eligible for enrollment into the ICHRA by separating them into classes and establishing a monthly reimbursement allowance.  Eligible employees will select an individual health plan, pay for the health plan and any out-of-pocket expenses.  The employees will submit their premium and eligible out-of-pocket expenses for reimbursement.  The employer will then reimburse the employee on a tax-free basis, up to their maximum amount established. 

The ICHRA helps employers offer a health benefit that helps control cost, is simple to administer, and is personalized to their business.  This benefit allows employers to set a defined benefit limit for each employee, having greater control over the health benefits budget, while helping to reduce the risk of unexpected costs.  The ICHRA is a great fit for a variety of employers, including those:

• With significant group rate increases year to year
• With a high number of variable hour employees ( Hospitality or retail industry)
• Looking to set a budget and help create predictability
• Adding a benefit package when they didn’t offer one before

In turn, employees benefit from the ICHRA by having the power to choose the individual health insurance plan that works for them to meet their personal needs and provide them with more control over their health care. F

For more information on the BASE® Individual Coverage HRA (ICHRA), contact BASE® at 888.386.9680 or visit www.BASEonline.com.

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