o Enhances your existing benefits package to provide and great recruiting and retention tool.o Easier to hit minimum participation requirementso Provides bottom line profit through payroll tax savings o Typical employee – Married with two children o $1,415 additional cafeteria plan exclusion o Average Employer savings = $449.97 per year per employee o Example 225 employees = $101,243.25 savings annually
o All Benefit eligible employees are provided with a qualified health plano Higher contribution limits than traditional FSA, HSA and HRAo Employees that participate in the company’s health plan get a more robust benefits package o Fill in gaps in major medical plans with supplemental coverage o Reduce financial risk o Guaranteed issue life insurance for all participantso All with no change in the employee’s net take home pay.
o A recent American Journal of Medicine survey shows: o In 2010 there were 1.4 million bankruptcies o 62.1% listed medical bills as a major contributing factor o 75% of those filing bankruptcy actually had major medical insurance o Medical bill related filings have increased 49% over the last six yearso Removal of lifetime maximums and pre-existing exclusions have caused premiums to significantly increaseo Companies are being forced to move to higher deductible plans to control the increasing costso Employees are faced with higher out of pocket risk
o Employer contracts with Cypress Benefits Administrators under IRC Section 162 as a “Benefits Administrator”.o CBA establishes a “Self Funded Defined Benefits Plan” under Sections 125 and 105.o Employees contribute into the plan on a pre-tax basis. Contributions are based on average deductibles, co-insurance, dependent care, out of pocket expenses and insurance premiums.
o The 105 cafeteria plan provides a schedule of “defined benefits” to reimburse the employee for medical expenses.o Employees can select the “Benefit Extension Option” o The employee can participate in the employer’s major medical plan or our defined benefit plan. o The available account balance is automatically loaned to the employee each pay cycle. o The tax savings create an allowance for life insurance and a “benefits bank” to purchase supplemental insurance coverages.
oContributions to the plan are non-discriminatory under Section 105h. o A self –insured medical reimbursement plan satisfies the requirements of this paragraph only if – A. The plan does not discriminate in favor of highly compensated individuals as to eligibility to participate; and B. The benefits provided under the plan do not discriminate in favor of those who are highly compensated individuals. Compliance - Deductions are standardized for every employee based on marital status and dependents, regardless of income.
o Amounts received under accident and health plans. o Cash received by the employee is taxable if received from the employer or received from plans funded by the employer. o Gross income does not include amounts paid, directly or indirectly, to the taxpayer to reimburse the taxpayer for expenses incurred by him for his medical care or that of his spouse and his dependents.Compliance - Amounts received under the Defined Benefits Program are loans from funds contributed by the employee, therefore they are not taxable.
o Lowers taxable income for employees. The tax savings are used to create a benefit bank to purchase additional coverage from the cafeteria options.o Lowers matching FICA and Medicare contributions for employers. A portion of the savings is paid to CBA for the administration of the plan. The fees paid are a deductible business expense.o CBA administers the plan documents.o CBA assumes the tax liability for the funds contributed by the employee to the cafeteria plan. This shifts the tax burden from the employee to CBA.