Benefits are among the top considerations for employees to consider when accepting a position at your company. Medical, Dental, Vision, Life, and Disability are all great attractions, especially if your company offers cost sharing or completely covers the cost of some benefits. The cost both for these types coverage can add up very quickly; additional benefits that have lower or no cost to the company, can reduce long-term medical coverage cost, and also improve your employees’ satisfaction.
Flexible Spending Accounts (FSAs)
An FSA account lets employees set aside pre-tax dollars from their paychecks over the course of the year to pay for healthcare and/or dependent care. The FSA can be used to cover the employee’s out-of-pocket medical expenses, alternative therapies like acupuncture, at-home diagnostic monitors, and other health-related products, as well as dental and vision expenses. A dependent care FSA is a separate product that can be very handy if your employees have children or other qualified dependents needing care.
The FSA is sponsored by the employer, so the company has some administrative costs, but the tax benefits for both the employee and employer, usually outweigh the costs in most cases. Employees pay for their elected amount pre-tax, and the FSA amount is not subject to payroll taxes for Social Security and Medicare, benefiting the employer. Employers can also choose to add roll-over so unused funds (to a certain amount) can be used in the following year. One consideration for small businesses may be their turn-over rate, as if employees spend all their FSA dollars up front and then quit, the employer will eat the remaining cost.