CSQ ADVISOR
Martin Levy
President, Corporate Strategies, Inc.
Martin Levy, CLU/RHU is president and founder of Corporate Strategies, Inc., located in Encino, California for over 20 years. Corporate Strategies, Inc. specializes in helping small-to-medium size businesses develop strategies to turn the benefits that they offer into business assets, using proprietary tools developed by the organization.
The firm is comprised of professionals in human resource, executive leadership, insurance, employee benefit design, compensation, and tax and financial planning. The firm has proven expertise in helping companies maximize the value of their benefit offerings.
Corporate Strategies, Inc. uses a benefit scorecard to help employers rate the opportunity to improve their delivery and effectiveness of their plans. They are one of the largest insurance brokers in the greater Los Angeles area, and a top-20 ranked broker for Anthem in California.
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Health Care Reform
New Strategies for Managing One of Your Largest Expenses
With the passage of the $940-million-dollar 2010 health care reform package, business owners are anxiously awaiting the impact of the new bill, and most are hoping for significant relief from both the burden and expense of delivering health insurance. Because there may be little immediate relief in sight, business owners need to explore every possible opportunity to help mitigate these costs.
There are a lot of new ways for companies to offer benefits packages to their employees that many business owners may be unaware of. Despite improvements in health plans, designs, and the technology available to manage them all, many companies have not changed their fundamental approach to keep up with the times.
Employee benefits (including health insurance) are many times a company’s third biggest expense, just behind payroll and rent. Because the employment pendulum has swung in favor of companies, it creates an opportunity to extol the virtues of their benefits. The clear communication of programs, and the dollar value relative to salaries, can help employees better understand their entire compensation package and help your company get the maximum mileage from the expense. Making sure employees understand the value of their benefits also makes it easier for companies to ask them to contribute to plans that had been previously been delivered “a gratis,” a necessity for some businesses to stay afloat during rough economic times.
The engagement of employees in the selection of benefit levels and plan choices is critical to every employer. When the plans are interactive and employees are informed and educated, the employer can transform the expense of healthcare into an asset, all the while offsetting his costs or setting a flat dollar allocation to limit his expense.
Many companies have been reluctant to re-engineer their plans because of the complexity and lack of guidance available to them, yet no firm is too small to evaluate and implement multiple plans and choices. Many companies still deliver a “one size fits all” approach with respect to benefits, which is akin to using a screwdriver to pound in a nail. Most insurance providers have developed plan designs to help business owners grapple with the delivery of insurance, creating a “choose your own” platform, which helps to ease the dialogue about sharing in the costs. Many companies can benefit by engaging an outside resource to help customize and personalize the benefit selection process.
There are two specific tools that make up the backbone of planning today:
- Make sure employee health insurance contributions are being taken out of payroll on a pre-tax basis through a Section 125 plan commonly known as a “Cafeteria Plan.” Even if you think they are, double-check. Having these funds taken out on a pre-tax basis will lower your payroll tax and lower employees’ tax basis. A simple document allows for “premiums only,” whereas a more complex version allows for many items such as dependent care and unreimbursed medical expenses, (even parking) to be paid from pre-tax dollars.
- Consider Health Savings Accounts (HSA) for yourself and your employees. The government developed these accounts as a way to help employees pay for medical benefits using tax deductible funds, and can be either employee or employer funded. The trick with HSAs is have someone well-versed in these accounts work with employees to determine an appropriate amount for withdrawal, because there are heavy tax consequences if you need to withdraw the funds for purposes other than medical benefits (only certain types of health plans can be paired with an HSA).
Employers of every size will continue to deliver benefits as a way to compensate, attract, and retain staff, and in exchange, receive favorable tax treatment of the expense. However, it’s too large of an item to allow for error. While waiting for the impact of the implementation of federal legislation, employers of every size need to work closely with their advisers to help them deliver the best possible opportunities to their employees.
