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Using Employee Benefits to Your Business Advantage

December 1, 2015

Including a variety of benefits in your compensation package can help you not only attract and retain the best employees but also manage your tax liability:

Qualified deferred compensation plans. These include pension, profit-sharing, SEP and 401(k) plans, as well as SIMPLEs. You can enjoy a tax deduction for your contributions to employees’ accounts, and the plans offer tax-deferred savings benefits for employees. Small employers (generally those with 100 or fewer employees) that create a retirement plan may be eligible for a $500 credit per year for three years. The credit is limited to 50% of qualified startup costs. (For more on the benefits to employees, see “401(k)s and other employer plans.”)

HSAs and FSAs. If you provide employees with a qualified high-deductible health plan (HDHP), you can also offer them Health Savings Accounts. Regardless of the type of health insurance you provide, you also can offer Flexible Spending Accounts for health care. If you have employees who incur day care expenses, consider offering FSAs for child and dependent care.

HRAs. A Health Reimbursement Account reimburses an employee for medical expenses up to a maximum dollar amount. Unlike an HSA, no HDHP is required. Unlike an FSA, any unused portion can be carried forward to the next year. But only the employer can contribute to an HRA.

Fringe benefits. Some fringe benefits, such as group term-life insurance (up to $50,000), health insurance, parking (up to $250 per month for 2015), mass transit / van pooling (up to $130 per month for 2015 — unless Congress extends parity again) and employee discounts, aren’t included in employee income. Yet the employer still receives a deduction for the portion, if any, of the benefit it pays and typically avoids payroll tax as well.

Certain small businesses providing health care coverage to their employees may be eligible for a tax credit.

Warning: Beginning in 2015, if you’re considered a large employer and don’t offer full-time employees sufficient health care coverage, you could be at risk for penalties under the Affordable Care Act. See “ACA play-or-pay penalty risk for large employers begins in 2015, but you may be eligible for an exemption” for more information.

 

The services of a legal or tax advisor should be sought before implementing any ideas contained in this blog. To reach a financial advisor at Lane Gorman Trubitt, PLLC, call 214.871.7500 or email at askus@lgt-cpa.com.

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