Cash for Opting Out

[Guest jfgc106]

We have a POP plan with medical, dental and group life. We also allow employees to purchase cancer policies. We have a couple of employees who have coverage through their spouses. While our plan is primary, they have excellent coverage elsewhere for very little premium. Could we ask them to accept a cash amount to opt our of our plan? It would save the company money especially since we are self-funded.

[mroberts]

There's a lot of things that could be done when looking at cafeteria plans. It sounds like your medical plan isn't the greatest and that many employees have better luck getting coverage elsewhere, especially when they have a spouse. One of the things that you can do is change your plan a little and give your employees x dollars for benefits annually. Whatever they don't spend can be paid to them in the form of cash throughout the year and whatever they spend in excess of this amount would be deducted from their checks.

There are a lot of things to determine before you do this, such as amounts given to single employees, employees with dependents, the correct amount to give and so on. If you would like help with these next steps, let me know and either I can assist you, or refer you to someone in your area.

Thanks,

Matt

matt.roberts@bbinsurance.com

[Guest deacon]

I have the same dilemma except that it's not the medical plan is not good. We have an employee whose spouse works for a large hospital where the cost of coverage for spouse's is practically nothing. We don't want a full-fledged cafeteria plan, just this guy to consider keeping the spouse's plan only. Can we ask him to and just offer somewhat less in cash than the total annual premium. Of course then he may take it and decide in 2 months that he wants back on the plan.

[mroberts]

Actually, most companies do not offer the employees the exact amount of cash back as put towards the benefits. They usually buy back the unused cafeteria dollars at say $0.50 on the dollar. This way, the dollars are being used for what they are meant for - employees getting necessary insurance.

As indicated, there are many things to look at when creating a plan like this. =)

[Guest pauljose]

Another possibility to consider......

My wife opted out of her company's medical plan to be covered by mine. Her employer reimburses her the cost of coverage (i.e., the premiums I pay at my work). AFAIK, her company treats it as an expense reimbursement, no taxes are taken out of that amount.

I'm not sure of any ramifications on the employer's side, but it comes across as a very nice thing to do...

[SLuskin]

I don't think you can properly reimburse that expense pretax as an expense.

[Guest jfgc106]

Would the cash in lieu of health coverage have to be offered to all employees or can we just provide him with a bonus?

[mroberts]

You should offer the same plan to all employees or else you probably will have a discrimination problem on your hands at some point in the future.