Through the Spring Insurance Group, we offer a number of consumer-driven health care products and services. What are the differences between products and how do you know which plan is best for your business? Here are some key points to keep in mind:
Section 125 Plans
Section 125 Plans are a tax savings employee benefit plan that allows participating employees to direct a portion of their pre-tax salary to be used to pay for approved premiums, health, dental and vision care expenses and dependent care expenses. The taxes saved by the participating employee are federal income tax, state income tax, and FICA (Social Security and Medicare) tax. This generally results in a total tax savings of approximately 28.65% or more and a savings for the employer of 7.65% (FICA) for each employee enrolled in the plan. There are three types of plans under the 125 shell established by the employer:
Premium-Only Plans (POP)
POP Plans are the most basic Section 125 Plan option. Employees can pay for their share of insurance premium using pre-tax dollars, thereby lowering their taxable income and saving them money.
Flexible Spending Accounts (FSA)
FSA’s allow participating employees to pay for a variety of qualified out-of-pocket health, Prescription, Dental, Vision care and over the counter medication costs on a pre-tax basis. FSA’s are an excellent vehicle to pay for expenses not covered by your health, dental or vision plans such as copays or deductibles along with over the counter products at your pharmacy or grocery store.
Dependent Reimbursement Accounts (DRA)
A DRA is established in a similar fashion to that of a FSA. Employees have the opportunity to decide how much money they want in their DRA account via pre-tax salary deductions. When the employee incurs approved dependent care expenses they are able to withdraw money from their DRA to cover the expenses. The benefit of these accounts is that funds are not taxed when withdrawn, thus giving the employee tax-free money to pay for approved expenses. This type of account has an annual maximum reimbursement of $5,000 per each employee.
Healthcare Reimbursement Account (HRA)
Similar to that of a FSA, but funded with only employer funds, HRA’s are established to offset deductibles, copays and other medical, dental and vision expenses. With a HRA, the employer can direct how the funds will be used and the amount allocated for each employee. When the employee incurs approved expenses, they are able to withdraw money from their HRA to cover the expenses. All unused HRA monies are returned to the employer at the end of the year unless otherwise outlined. More and more employers are utilizing HRA’s in conjunction with high deductible plans as the premiums of health insurance plans continue to rise. By moving to a high deductible health plan, they see premium reductions and utilize the HRA’s to fund a portion or all of the deductible.
Health Savings Account (HSA)
An HSA integrates a “qualified” high deductible HMO or PPO plan with a tax-free savings and distribution account to make up this increasingly popular consumer directed plan. Spring works with the nation’s best HSA administrators to assist in facilitating these plans. HSA accounts can be funded by the employee (Tax free if not an owner), employer or a combination of both. The HSA account is controlled by the employee and acts like a medical 401K plan. Moving to a high deductible plan saves premiums and reduces further plan increases while furthering the consumer directed initiatives.
Contact our brokerage team today using the form on this page for more information about any of our consumer-driven health products and get a free quote on the products that fit your business and employees best.