Employer Subsidy via payroll deduction

[Guest benefitsnerd]

I would like to hear feedback regarding the prospects of an employer increasing an employee's pay comensurate to the cost of a voluntary premium (i.e., voluntary life insurance) so that employee can afford voluntary premium. What if any considerations are suggested before recommending that an employer do this?

[GBurns]

I assume that they employee will pay the premiums with after tax dollars and will not pre-tax under a section 125 cafeteria plan.

The only thing to remember is that the employer will have to give enough of an increase to also take care of the taxes that will be paid related to the increase. The employer will also have the extra matching of FICA and an increased payroll amount that might affect Workers Comp, UC, SUTA and General Liability premiums.

Still a good idea, which if communicated properly will be appreciated by the employees. If not communicated properly, the opportunity to create valuable goodwill will be lost. The value of this goodwill can offset the extra expenses.

[Guest benefitsnerd]

I assume that they employee will pay the premiums with after tax dollars and will not pre-tax under a section 125 cafeteria plan.

The only thing to remember is that the employer will have to give enough of an increase to also take care of the taxes that will be paid related to the increase. The employer will also have the extra matching of FICA and an increased payroll amount that might affect Workers Comp, UC, SUTA and General Liability premiums.

Still a good idea, which if communicated properly will be appreciated by the employees. If not communicated properly, the opportunity to create valuable goodwill will be lost. The value of this goodwill can offset the extra expenses.

Thank you for the feedback.

You make reference to the premium being paid pre vs post tax. Is that for the purpose of receiving benefits tax free?

[GBurns]

If you pre-tax premiums for voluntary items such as STD and LTD the benefits are taxable income. Items such as Cancer and Sickness & Accident have the indemnity payments as possibly taxable and the medical expense related payments possibly tax free depending on other reimbursements or coverage. Enough grey areas to make you have to think.

A good source of info is the supplier of the voluntary products. Ask them for something in writing regarding the taxation of any benefits.

Which carrier are you considering using?

[Guest benefitsnerd]

The carrier is GE Fiananical / Genworth. The product that I am referring to would be voluntary life / AD&D.