CAFETERIA PLAN ADVANTAGES
A cafeteria plan, also known as a Section 125 plan, is a type of employee benefit plan that allows employees to choose between receiving cash or selecting from a variety of benefits, such as health insurance, dental coverage, vision insurance, and retirement plans. Cafeteria plans are a popular employee benefit option for many reasons, including their advantages for employers. Here are some of the key benefits that employers can enjoy by implementing a cafeteria plan.
2. Cost SavingsEmployers can also save money by offering a cafeteria plan. Since employees can choose from a range of benefits, employers can offer a lower-cost benefits package and still meet the diverse needs of their workforce. Additionally, offering a cafeteria plan can help employers reduce their payroll taxes, since employees who participate in the plan can reduce their taxable income.
3. Attracting and Retaining Talent
A well-designed cafeteria plan can also help employers attract and retain top talent. In today's competitive job market, a comprehensive benefits package can be a key factor in an employee's decision to join or stay with a company. By offering a cafeteria plan, employers can differentiate themselves from other employers and demonstrate their commitment to providing a flexible and personalized benefits package.
4. Compliance with Federal Regulations
Cafeteria plans are regulated by the Internal Revenue Service (IRS) and must comply with specific federal regulations. However, by following these regulations, employers can take advantage of tax benefits and avoid costly penalties. Working with a qualified benefits consultant can help employers ensure that their cafeteria plan is compliant with federal regulations.
Finally, cafeteria plans offer employers flexibility in designing their benefits package. Employers can choose which benefits to offer, how much to contribute to each benefit, and what percentage of employee contributions to match. This flexibility allows employers to create a benefits package that is tailored to their specific needs and budget.
In conclusion, cafeteria plans offer a range of advantages for employers, including increased employee satisfaction, cost savings, attracting and retaining top talent, compliance with federal regulations, and flexibility. By implementing a cafeteria plan, employers can create a more personalized benefits package that meets the needs of their employees while also achieving their business goals.
Employee benefits are a crucial factor in attracting and retaining top talent in any organization. Benefits can range from traditional offerings such as health insurance, retirement plans, and paid time off, to more innovative benefits such as flexible work arrangements, wellness programs, and professional development opportunities. In this article, we will explore the importance of employee benefits in hiring new employees.
Attracting Top Talent
In today's competitive job market, employees have a wide range of job opportunities available to them. As a result, it's essential for organizations to offer a comprehensive benefits package that can attract top talent. Employees are looking for benefits that can provide financial security, work-life balance, and opportunities for personal and professional growth.
A strong benefits package can also differentiate an organization from its competitors. Organizations that offer innovative and comprehensive benefits packages can stand out from others and be more appealing to job seekers. This can be particularly important in industries with high demand for skilled workers, where organizations must compete for top talent.
Employee benefits are also essential for retaining employees. When employees feel valued and supported by their organization, they are more likely to remain with the organization for the long term. Benefits such as retirement plans and professional development opportunities can demonstrate an organization's commitment to investing in its employees' future.
In addition, benefits can help improve employee morale and job satisfaction. Benefits such as flexible work arrangements or wellness programs can help employees maintain a healthy work-life balance and improve their overall well-being. When employees feel supported and engaged, they are more likely to be productive and motivated in their work.
While offering employee benefits may seem costly, it can actually lead to cost savings for organizations in the long run. When organizations offer benefits that promote health and wellness, such as wellness programs and health insurance, employees are less likely to get sick or require time off work. This can lead to increased productivity and lower healthcare costs for the organization.
In addition, offering a comprehensive benefits package can help reduce turnover costs. When employees are satisfied with their benefits and overall compensation package, they are less likely to leave the organization. This can save organizations money on recruitment and training costs for new employees.
In conclusion, employee benefits are essential for attracting and retaining top talent, improving employee morale and job satisfaction, and reducing turnover and healthcare costs. Organizations that offer innovative and comprehensive benefits packages can differentiate themselves from competitors and attract and retain the best employees. By investing in employee benefits, organizations can create a positive work environment that promotes employee well-being and supports long-term success.
EMPLOYEE PAID TIME OFF (PTO)
Paid time off (PTO) is an important employee benefit that provides employees with time away from work with pay. This benefit can include vacation time, sick leave, and personal days, and it's designed to help employees maintain a healthy work-life balance. In this article, we'll explore the importance of PTO as an employee benefit.
Improved Employee Well-being
One of the most important benefits of paid time off is the improvement of employee well-being. Employees who have time to rest and recharge are more productive, engaged, and happy in their work. PTO provides employees with the opportunity to take time away from work and focus on other aspects of their lives, including spending time with family and friends, traveling, or pursuing hobbies and interests.
Reduced Stress and Burnout
Another important benefit of PTO is that it can help reduce stress and burnout. Employees who are overworked and do not take time off are at risk of becoming burned out, which can lead to decreased job satisfaction and productivity, as well as increased absenteeism and turnover. By providing employees with paid time off, organizations can help reduce stress and prevent burnout, leading to a happier and more productive workforce.
Increased Employee Loyalty
Offering paid time off can also help increase employee loyalty. Employees who feel that their organization values their well-being are more likely to remain with the organization for the long term. PTO can also be a valuable tool for attracting and retaining top talent. In competitive job markets, organizations that offer a generous PTO policy can differentiate themselves from their competitors and become more attractive to job seekers.
Compliance with Regulations
Organizations that offer PTO must comply with federal, state, and local regulations. For example, the Family and Medical Leave Act (FMLA) requires covered employers to provide eligible employees with up to 12 weeks of unpaid leave for certain medical and family reasons. Some states and localities also have their own PTO regulations. By offering a comprehensive PTO policy, organizations can ensure compliance with these regulations and avoid costly legal issues.
In conclusion, paid time off is an essential employee benefit that provides employees with time away from work with pay. It can help improve employee well-being, reduce stress and burnout, increase employee loyalty, and ensure compliance with regulations. By offering a comprehensive PTO policy, organizations can demonstrate their commitment to their employees' well-being and create a positive work environment that promotes productivity and success.
In the United States, the most common type of retirement plan is the trusty 401(k). With over 60 million active participants and an estimated $7.3 trillion in assets, businesses of all sizes offer this type of plan to help their employees save for the retirement they deserve.
However, not all 401(k)s are the same. While offering any retirement plan can be a huge benefit, a “safe harbor” 401(k) plan can be a particular win-win. Safe harbor plans can maximize a company’s tax savings and retain employees, all while simplifying responsibilities for the employer.
Safe Harbor 401(k) Plans - The BasicsWhat is a Safe Harbor 401(k)?Like a traditional 401(k), a safe harbor plan gives employees access to a tax-advantaged savings and investment account. Generally, contributions to this account are automatically withdrawn from an employee’s paycheck and invested into funds of the employee’s choosing. However, the key difference between a traditional and a safe harbor 401(k) is in the employer contribution: With a safe harbor plan, the employer is required to make contributions and contributions become fully vested when made. Contributions can either be limited to employees who make deferrals or offered to all eligible employees.
How Do Small Businesses Benefit From Safe Harbor Plans?When 401(k) plans were first introduced, a central goal of the program was to ensure as many employees as possible participated, and that businesses didn’t disproportionately favor their highly-compensated employees when making employer contributions. As a result, traditional 401(k) plans are subject to what’s called “non-discrimination testing,” a form of compliance auditing that ensures the average contributions of highly paid employees does not exceed those of everyone else by more than 2%.
If the thought of this added paperwork turns you off, then a safe harbor plan may be for you.
Unlike traditional 401(k) plans, safe harbor plans automatically pass a number of required tests that keep the plan tax-qualified and avoid other penalties and costs. For this reason, safe harbor plans can be a great choice for small businesses that could have trouble passing nondiscrimination testing. For example, a family-owned or small business with more highly compensated employees relative to "rank and file" or non-highly compensated employees may otherwise have difficulty passing compliance tests.
How Do Employer Contributions Work in a Safe Harbor Plan?There are three “categories” of employer contributions that a business can choose to commit to when designing its safe harbor plan. These include:
More Good News About Safe Harbor PlansSECURE Act Tax Credits - Save Up to $16,500Thanks to the 2019 SECURE Act, small businesses can receive a tax credit as high as $16,500 for starting a new, qualified retirement program—which includes a safe harbor 401(k).
The tax credit is equal to $250 for each non-highly compensated employee (NHCE) who is eligible to participate in the plan, with a minimum credit of $500 and a maximum credit of $5,000, for three years. Additionally, if a business adds an auto-enrollment feature to your plan, known as an eligible automatic enrollment arrangement (EACA), they can claim a tax credit of $500 per year for a three-year taxable period. However, they must notify employees of the auto-enrollment feature and withhold wages from automatically enrolled participants at the plan’s default deferral rate.
How Business Owners BenefitSafe harbor plans are available to everyone at a company, including business owners who work for their company. These employers can contribute the maximum annual deferral amount to their own 401(k) plan, which is $20,500 for 2022 plus any catch up contributions. Further, come tax time, employers will be able to minimize their business’s expenses by deducting applicable employee and employer matching contributions from the company. Because many owners pay themselves out of their company’s profits, these savings can directly improve their bottom line.
There is Still Time to Maximize the Savings for 2022Safe harbor plans must be in effect three months prior to the plan year-end date, which means eligible employees must be able to make salary deferrals starting no later than the first pay date on or following October 1. Businesses interested in offering a safe harbor 401(k) plan should gear up to act soon: Leave time to get your plan up and running so you can give employees long enough to make elections before their first payroll.
Dates to Know for Switching to a Safe Harbor PlanIf you already have a different type of plan, no worries at all. You can always amend your offering to take advantage of safe harbor benefits, but there are some important dates to know:
In its spring regulatory agenda, the U.S. Department of Labor (DOL) announced its plans to issue a proposed overtime rule in October 2022. According to the agency’s regulatory agenda, this proposed rule is expected to address how to implement the exemption of executive, administrative and professional employees from the Fair Labor Standards Act’s (FLSA) minimum wage and overtime requirements.
Changes to minimum wage and overtime requirements under the FLSA could impact compliance costs and litigation risks for employers.
The proposed overtime rule could provide clarity for classifying exempt employees and increasing their salary levels under the FLSA. Some experts believe the DOL could even create automatic annual or periodic increases to exempt employees’ salary levels by linking them to the consumer price index, allowing exempt employees’ salary thresholds to adjust without formal rule-making.
The current federal salary threshold for exempt employees is $35,568. There’s no firm date for when the agency will release the proposed overtime rule.
Regulatory agendas outline a federal agency’s goals for the upcoming months. Although these agendas aren’t fixed, they give insight into the current administration’s priorities and activities.
Once the DOL publishes a proposed rule in the Federal Register, there will be time designated for public comment. Subsequently, the agency will review comments and determine whether to move forward with a final rule. Even after the DOL publishes the proposed overtime rule, it will likely be some time before this rule becomes final, if ever.
Employers are not obligated to change how they classify or pay employees until the DOL’s proposed rule becomes final. However, potentially impacted employers will want to follow the DOL’s rule-making process closely.
With summer being a popular season for youth employment, the U.S. Department of Labor (DOL) recently reminded employers hiring youth-aged workers to comply with federal child labor laws to ensure these hires have a safe and beneficial experience.
The DOL’s Fair Labor Standards Act (FLSA) prohibits employers from allowing youth-aged employees—workers who are under 18 years old—to perform certain tasks and work more than a specified number of hours. However, child labor laws can vary based on the industry and state. Failing to comply with the FLSA can result in significant consequences for employers.
Notably, the DOL’s reminder highlights recent investigations uncovering child labor law violations. Most penalties were related to child labor violations, including:
What This Means
This recent warning is part of the DOL’s effort to ramp up enforcement and could translate to an increase in investigations this summer and beyond. As such, employers should continue to review relevant child labor laws to ensure compliance. Employers concerned about potential violations are encouraged to speak with legal counsel.
To aid employers in keeping youth-aged workers safe, the DOL provides some general tips.
Recently, the IRS released Revenue Procedure 2022-24 to provide the inflation-adjusted limits for health savings accounts (HSAs) and high deductible health plans (HDHPs) for 2023. The IRS is required to publish these limits by June 1 of each year. The limits include:
Eligible individuals with self-only HDHP coverage will be able to contribute $3,850 to their HSAs for 2023, up from $3,650 for 2022. Eligible individuals with family HDHP coverage will be able to contribute $7,750 to their HSAs for 2023, up from $7,300 for 2022. Individuals aged 55 or older may make an additional $1,000 “catch-up” contribution to their HSAs. The adjusted contribution limits for HSAs take effect as of Jan. 1, 2023.
The minimum deductible amount for HDHPs increases to $1,500 for self-only coverage and $3,000 for family coverage for 2023 (up from $1,400 for self-only coverage and $2,800 for family coverage for 2022). The HDHP maximum out-of-pocket expense limit increases to $7,500 for self-only coverage and $15,000 for family coverage for 2023 (up from $7,050 for self-only coverage and $14,100 for family coverage for 2022). The adjusted HDHP cost-sharing limits take effect for the plan year beginning on or after Jan. 1, 2023.
Employers that sponsor HDHPs should review their plan’s cost-sharing limits (minimum deductibles and maximum out-of-pocket expense limit) when preparing for the plan year beginning in 2023. Also, employers who allow employees to make pre-tax HSA contributions should update their plan communications for the increased contribution limits.
Employees are walking away from their employers in record numbers; some are calling it the “Great Resignation.” A Prudential survey conducted toward the end of 2021 found that 46% of workers were actively seeking or considering finding a new job, and labor statistics backed those findings. According to the U.S. Labor Department, approximately 4.5 million workers quit their jobs in November 2021, setting a new record.
This might appear like welcome news for employers looking to hire—greater unemployment means more potential job candidates. However, confoundingly, there were still around 1.5 available jobs for each unemployed person near the end of 2021, according to USA Today. And, for the last six months of the year, job openings posted by employers topped 10 million, according to the U.S. Labor Department.
This information helps illustrate the key problem employers face right now: Workers are willing to quit jobs—and turn down open positions—that don’t satisfy their needs. Expanding employee benefits offerings is one of the best ways employers can show they provide workers with more than just a paycheck. The following are some of the most attractive perks employers are using to strengthen their attraction and retention efforts:
On March 14, 2022, the Equal Employment Opportunity Commission (EEOC) issued a new set of frequently asked questions and answers (FAQs) related to the COVID-19 pandemic. The new FAQs discuss how certain employment actions based on an employee’s need to protect or care for another person may violate federal fair employment laws enforced by the EEOC. Among others, these laws include Title VII of the Civil Rights Act (Title VII) and the Americans with Disabilities Act (ADA).
Caregivers and Protected Traits
Although EEOC-enforced laws do not prohibit employment discrimination based solely on an employee’s caregiving status, they do prohibit employers from taking adverse actions based on certain “protected traits,” even where those actions are well-intentioned. These laws also prohibit discrimination based on a protected trait of an individual for whom an employee provides care. Protected traits include race, color, religion, national origin, sex, age (40 or older), disability and genetic information.
In general, there is no requirement for employers to accommodate an employee’s caregiving duties under EEOC-enforced laws. However, other laws (such as the Family and Medical Leave Act) may require leave or other adjustments. Employers may also choose to provide accommodations for caregiving duties, as long they do so consistently and without discriminatory intent or effect based on a protected trait.
Additional Guidance on Caregiver Discrimination
The new FAQs supplement the EEOC’s existing policy guidance, fact sheet and best practices document for employers, all of which discuss caregiver discrimination in a range of circumstances beyond the pandemic.