Misc. Employee Beneftis

[Guest JHodge]

We have less than 100 employees and recently changed insurance plans. The new plan has less counseling benefits than the previous plan and we have had someone under constant care for a long period of time. My question is there any way to provide the difference in benefits (approximately $4000/yr) to the employee without tax.

[Guest jamesfdavis]

Method 1: Ask the carrier to amend the plan to the higher benefit for all employees. Expect to pay a higher premium for the plan change.

Method 2: Reimburse the individual employee's expenses on a taxable basis as cash compensation outside the plan. Gross up his reimbursement to make up for the taxes.

I would not make a claims exception for him under the plan.

Method 1 could be cheaper in the long run, if your plan is community rated.

[SLuskin]

You could also establish a Section 125 Plan with a medical expense reimbursement account. You could cap it at $4000 or whatever amount you wanted. The employer has a number of risks in doing this. For example, if an employee submitted a claim for $1000 of counselling and had not payroll deducted that amount yet, the plan would still have to reimburse him. Then, if the employee leaves your employment, you would lose the balance between the employee contributions and disbursements. The account can be limited in the document to mental health expenses only, although very few employers actually place limits like this in their plans. Most open it up to a wide variety of permitted medical/dental/vision/mental health/etc. expenses

[QDROphile]

Start your own self funded health plan under section 105(e) of the Code to cover the gap between the new and old benefits (subject to whatever limits you choose), assuming you do not run afoul of section 105(h) of the Code. You could limit the eligibility for plan, again subject to 105(h). Could you create such a plan and limit it to just one person? Maybe. Get professional advice. "Self funded" means employer funded, as distinguished from funded through an insurance contract.