Small Company Question - 403(b) & Health Ins

[Inagentcac]

Hopefully, somebody can help me. I have a small non-profit company who currently does not offer health insurance. Their "parent" firm contributes 10% of compensation to a 403(b) plan for employees.

The company wants to offer a plan and allow the employees to utilize the 10% on either health insurance, the 403(b) plan...or a combination of both.

So...what shall I tell them? Is this an issue only with the policy of the parent company, are their legal or other plans issues to worry about? Is there a specific type of plan HRA or otherwise that might serve both possible potential plans? If anyone has any advice, or can refer me to some quality info on this topic it would be appreciated!

 

[0b1kanobee]

Depends.......they just can't willy nilly the parent company to do what they want (or can they).

 

[leevena]

The contribution strategy is not unusual. The important issue that arises is will the required participation level for medical be reached. A 10% contribution will probably not provide for a non-contrib single cost. They may want to address that issue first before proceeding.

 

[scagnt83]

There is no way to combine the two.

If the parent company wants to give the employees discretion to have part or all of the 10% go to HI, then that is fine, they can do that if they wish (as long as it includes all full time employees); but it will be just like the company picking up part of the HI (just like any normal case).


Im guessing that this is the idea of the CEO of the subsidiary, and he is hoping that there is some magic product out there that combines the two. There is not.


From an accounting standpoint, the parent probably recieves greater tax breaks for contributing to the 403b vs. HI.
Also, administering the discretionary funds would be an accounting nightmare; not to mention an additional cost to the parent company.

 

[leevena]

There is no way to combine the two.

If the parent company wants to give the employees discretion to have part or all of the 10% go to HI, then that is fine, they can do that if they wish (as long as it includes all full time employees); but it will be just like the company picking up part of the HI (just like any normal case).


Im guessing that this is the idea of the CEO of the subsidiary, and he is hoping that there is some magic product out there that combines the two. There is not.


From an accounting standpoint, the parent probably recieves greater tax breaks for contributing to the 403b vs. HI.
Also, administering the discretionary funds would be an accounting nightmare; not to mention an additional cost to the parent company.

Am I missing something or did I have a Senior Moment (which I am too young for). What is the problem with the scenario the employer wants? The way I read the question was that the employer would provide a sum of money and the ee could use it to purchase one of the coverages offered. What did I miss?

 

[0b1kanobee]

You can do all of these things.

1) He never said anything about combining the two. He said a combination of the two. Like a small glass of orange juice and a small glass of Champagne. He isn't talking about making a Mimosa here. At least not from the way I read it.

Simple...........must have permission to do whatever you want to do from parent company.

Reduce 10% on 403b side to allow monies to be freed up for health benefits.

Whether it is the right move investment wise I'm not sure but it sounds like they need money to be freed up for health benefits.

Can't get blood out of a turnip no matter what the tax benefit is. A deduction is no good if you don't make squat.....ect. ect.

 

[Full Throttle]

How could you give each employee 10% and give them discretion how to use it? You could give them a "benefit bonus" or increase their salary by 10%, although that would let them decide how to allocate their dollars, it would also allow them to do nothing as intended and buy beer instead.

I've used putting money into a Section 125 plan as a bonus for each employee, but that wouldn't work for retirement plan contributions, just health insurance and other 125 plan qualified benefits.

 

[0b1kanobee]

I don't see where anyone recommended giving employees discretion to use funds.

 

[Full Throttle]

The company wants to offer a plan and allow the employees to utilize the 10% on either health insurance, the 403(b) plan...or a combination of both.

I took that to mean employee discretion. If I'm wrong and the company will decide how the funds are allocated for the group of employees, then that works. Section 125(or HRA) for health insurance funding and a completely seperate retirement plan contribution set-up. If the point is to have employee descretion, then it won't work.

 

[0b1kanobee]

Yeah I think ya took it wrong. he stated their 403b and their health insurance. Nothing about their beer or any other want/need/benefit was mentioned as a choice.