HR BENEFITS & RETIREMENT ADVISORsm

December 2003                                   Lamar Blount, Editor

© 2003 Noel Services, Inc.  All rights reserved.  

No reproduction or redistribution permitted without prior written authorization.

 

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ONE-THIRD OF TOP EMPLOYEES QUIT OVER BENEFITS

VALUING TAXABLE FRINGE BENEFITS - IT'S REQUIRED

HELPING EMPLOYEES  WITH THEIR 401(K) PLANS

THE HIDDEN COST OF UNSCHEDULED ABSENTEEISM

PRE-TAX CONTRIBUTIONS WITH TAX-FREE EARNINGS & DISTRIBUTIONS

FREE RESOURCES FOR HR & BENEFIT MANAGERS

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ONE-THIRD OF TOP EMPLOYEES QUIT OVER BENEFITS

Do you want to improve your bottom line by cutting your turnover rate by 50% and keeping your top performing employees?  How d do the most successful organizations overcome the challenges of spiraling benefits costs, and how do they make sure their employees appreciate and take advantage of the benefits they offer? In this story, we give you the proven solutions.

 

Companies with highly committed employees outperform companies with low-commitment employees by 200 percent, according to Watson Wyatt’s WorkUSA 2002 study, and 61% of employees say that a good employee benefits program keeps them working for their current employer.  Many of the "Best Companies" have found that their strong benefits package allows them to attract (and retain) employees from other companies that actually pay higher salaries.

 

The Saratoga Institute found that the best performing companies have an average voluntary turnover rate of only 4 percent, compared to the nationwide average of nearly 9 percent. A study by nationally recognized Watson Wyatt found that 32 percent of top-performing employees cited dissatisfaction with employee benefits as being a significant factor in leaving an organization ("Strategic Rewards: New Employment Deals"). A US Labor Department study in 2003 says that it costs a company 1/ 3 of a new hire’s annual salary to replace an employee.  And this doesn’t even include the loss of customers or clients because of turnover and the negative impact on the business relationships.

 

The Principal 10 Best Companies for Employee Financial Security is a nationwide program that recognizes growing companies that excel at contributing to their employees' financial futures and sense of financial security through benefits and other programs. These best performing organizations were selected by a blue ribbon panel of judges, renowned for their expertise in employee benefits, including the Presidents of the Employee Benefits Research Institute and the Profit Sharing Council of America.

Here is just four examples of the many "Best Practices" from this report:

1. Work closely with your medical insurance provider to fine-tune your health benefits plan by implementing several small changes to reduce costs.

2. On an annual basis – for employees who do not contribute up to the maximum company 401(k) match, show them  exactly how much tax savings they miss out on.

3. Encourage participation in care management programs to ensure the most appropriate and cost-effective care for employees with chronic medical conditions.

4. Arrange small-group meetings instead of whole-company gatherings whenever possible. 

Action Tip:  If you want to reduce your organization's employee turnover and increase your bottom line, click on the links listed below to get a copy of the "Best Practices" and then Click here to get more information from HBA to help you in improving your benefits and enhancing employee satisfaction.

• Best Practices in Retirement Benefits 
• Best Practices in Healthcare Benefits 
• Best Practices in Employee Education and Communication

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GET A FREE BENEFIT CHECKUP 

If you want to find out how effective and efficient your employee benefit plans really are, HBA offers a free Benefit Checkup   Click here for more information.

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VALUING TAXABLE FRINGE BENEFITS - IT'S REQUIRED

The average employer in the U.S. spends 42 percent of payroll for fringe benefits, but surveys report that many employees have no idea the extent of those benefits or how much their employer is paying for their benefits. Often employees only become aware of their fringe benefits when they lose them or when payroll deductions are made for the fringe benefits. Generally, any fringe benefit that your organization provides to employees is taxable and must be included in the recipient's pay unless the law specifically excludes it.

Fringe benefits don't even have to be limited to your W-2 employees. Fringe benefits can be provided to independent contractor or even a director of your organization. A fringe benefit could be even be indirectly provided by your organization through business partners or clients to your employees.  If the recipient of the taxable fringe benefit is an employee, the benefit is subject to employment taxes and must be reported on Form W-2.  If the recipient is not an employee, the benefit is not subject to employment taxes but must be reported on a 1099 or other appropriate form.

In general, employers must include in the recipient's compensation, the amount by which the value of a fringe benefit is more than the sum of any amount the law excludes from pay and any amount the recipient paid for the benefit.

The IRS allows certain exclusions for fringe benefits. These rules exclude all or part of the value of the fringe benefit from income and are not subject to Federal income tax withholding. In most cases, they may even be excluded from Social Security and Medicare withholding and are not reported on the W-2. IRS Publication 15B outlines the various exclusions from taxes  for fringe benefits, including:

 

Accident and health benefits

Achievement awards

Athletic facilities

De minimis (minimal) benefits

Educational assistance

Employee discounts

Lodging on your business premises

Meals

Moving expense reimbursements

No-additional-cost services

Transportation (commuting) benefits

Tuition reduction

Working condition benefits

The IRS requires that employers must determine the value of non-cash fringe benefits no later than January 31 of the next year. Before January 31, employers may reasonably estimate the value of the fringe benefits for purposes of withholding and depositing on time.  You can add the value of fringe benefits to regular wages for a period using the federal income tax withholding tables or you can withhold Federal income tax at the flat 27% supplemental rate. You must withhold federal income tax, social security and Medicare taxes on the date or dates you chose to treat the benefits as paid.

 

Some employers will elect to pay the taxes on taxable fringe benefits for their employees, in which case . If your company chooses to pay for these taxes without deducting them from an employee's pay, the amount of the tax payments must be including in the employee's income. If an employee leaves the company and there are unpaid and uncollected taxes, the company is liable for both the employee and employer portions.

 

Action Tip: To maximize the value of the significant dollars being spent on employee benefits, your employees must be educated about the cost you are incurring and the taxes they save.  Click here for more information on how you can provide your employees with "Benefit Summary Statements" to help them see the value that you provide.  

 

Note there are two fringe benefit changes for 2004: (1) Cents-per-mile rule - The standard mileage rate you can use under the cents-per-mile rule to value the personal use of a vehicle you provide to an employee in 2003 is reduced to 36 cents a mile. (2) Increase in qualified parking exclusion -  Beginning January 1, 2003, employers can exclude up to $190 per month from an employee’s wages for qualified parking.  Click here for a copy of IRS Publication 15-B.

HELPING EMPLOYEES  WITH THEIR 401(K) PLANS
How can you respond to employee concerns about the poor performance of 401(k) plans over the past few years?  A recent survey by American Express Retirement Services shows that half of workers with 401(k)s want help deciding how to allocate their assets and many also wanted help with financial advice and saving for retirement. Click here  to read the entire article on Helping Employees Work With Their 401(k)s by Peter Carpenter.  Here are some key excerpts and highlights:

Many companies connect employees to sources of financial education like online investment tools or company-paid seminars, and find that this often leads to increased worker participation in 401(k) plans. However, many companies' 401(k) education programs don't work because they overwhelm their employees with too much information.

Financial educators believe that people generally prefer a strong personal approach, supplemented with written materials, software and other tools. For example, one firm offers a three-hour Retirement Planning course for employees and their spouses to help them calculate how much money will be needed for retirement. Other educational resources include websites, written materials, seminars, and toll-free help lines, often available through your 401(k) provider. 

Morningstar gives each of its 401(k) employees a personalized statement with account information and how certain scenarios – like more contribution – would affect their savings. American Express' retirement unit found that 25 percent to 30 percent of noncontributors decided to enroll in a 401(k) after getting a personalized statement and face-to-face consultation. 

Under the Department of Labor regulations, only independent investment advisers are allowed to provide investment advice to employees. Many companies feel they must walk a fine line between education and support without letting it turn into advice on choosing specific funds and many employers are reluctant to offer advice until the law is clarified. According to the Profit Sharing/401(k) Council of America, 41 percent of plan sponsors offer investment advice. 

Action Tip:  To minimize your risk, you must teach your employees the basics about retirement without offering specific investment advice.  Is your current 401(k) vendor providing your employees with the education they need?  Click here for information on using experienced money managers and registered investment advisors to provide training for your employees.

THE HIDDEN COST OF UNSCHEDULED ABSENTEEISM

The rate of unscheduled absenteeism was 1.9% this year, according to a recent study by CCH Incorporated.  For an organization with 50 employees, this amounts to an annual cost of over $32,000.  But, there is something that business owners and HR managers can do to reduce this cost and improve employee morale at no cost to your organization. 

While CCH finds that many employers have reined in absenteeism costs to some extent, the average cost is still significant - $645 per employee in 2003, compared to $789 per employee in 2002.   One of the best defenses against absenteeism rates and costs seems to be morale-boosting efforts.  Unscheduled absenteeism rates are significantly higher at companies that report poor or fair morale, and "presenteeism" rates (where workers show up for work but are less productive) are also higher.

 

These CCH findings are collaborated by another earlier study by Market Strategies and Harris Interactive, which found that 7 out of 8 of all employees experienced at least one "Legal Life Event" and that to resolve their Legal Life Events, these employees spent an average of 7 days away from work per year, plus 9 hours on the job dealing with these issues.  This is equal to 65 hours a year of unscheduled absences and lost time, which at an average wage rate of $12 per hour, is equivalent to an annual cost of $780 - per employee !  Click here for a copy of this study. 

 

Some of the "Legal Life Event" examples and average time absent from work are:

• Child Support - 26 days off plus almost 27 hours of lost time

• Divorce - 7.3 days off plus almost 10 hours of lost time

• Financial & Credit Issues - 1.7 days off from work

Action Tip:  Determine your own organization's cost for unscheduled absenteeism and calculate your direct cost.  Add the indirect cost of customer dissatisfaction and lost opportunities that may result from not having the right person on the job.  If you want to add some of that direct and indirect cost back to your bottom line, consider adding Legal Services to your voluntary benefits.  You can offer your employees one of the best legal services programs, backed by a NYSE listed organization with over 30 years of experience, for less than $15 a month.  Click here for more information.    

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GUARANTEED ISSUE BENEFITS FOR SMALL EMPLOYERS  

Organizations seeking to offer their employees an affordable, no-hassle basic benefits package now have several option to choose from which combines term life, AD&D and long-term disability insurance in a single benefits package, with a single premium payment and enrollment process. Plans are available for employers with as few as three employees, and for 25 to 500 employees, coverage is guaranteed without requiring individual underwriting by some carriers.  Click here for more information.

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PRE-TAX CONTRIBUTIONS WITH TAX-FREE EARNINGS & DISTRIBUTIONS

Yes, such a benefit plan does exist. Health Savings Accounts (HSAs) provide tax-free asset accumulation to meet health care needs. And distributions are tax free if used to pay for qualified medical expenses. Workers under the age of 65 can accumulate tax-free savings for lifetime health care needs and upon death, the HSA account may be transferred to the spouse on a tax-free

basis. 

 

A qualified HSA plan has a minimum deductible of $1,000 with a $5,000 cap on out-of-pocket expenses for self-only policies, with these amounts doubled for family policies. Preventive care services are not subject to the deductible. Individuals can make pre-tax contributions of up to 100% of the health plan deductible. The maximum annual contribution is $2,600 for individuals with self-only policies and $5,150 for families (indexed annually for inflation). Pre-tax contributions can be made by employers, individuals, and family members.

Action Tip:  This is an ideal way for self-employed professionals and small employers to get their healthcare needs met and save taxes, too. Go to http://waysandmeans.house.gov/media/pdf/healthdocs/hsa.pdf  for an overview of MSA legislation in the 2003 Medicare Reform Act.  Click here for more information on getting an HSA plan.  

FREE RESOURCES FOR HR & BENEFIT MANAGERS 

Just click on the titles of the items listed below to get these free resources:

Disability Employment 101:Learn to Tap Your "HIRE" Potential - This 56-page guide includes checklists and various other resources to aid employers that employ people with disabilities and provides information regarding vocational rehabilitation agencies, Disability and Business Technical Assistance Centers, and Centers for Independent Living. 

EEOC Fact Sheet on Diabetes and ADA Requirements -  This fact sheet explains how the Americans with Disabilities Act (ADA) applies to diabetes in the workplace and is designed to assist employers in understanding their responsibilities, such as: when diabetes is considered to be a disability under the ADA; when an employer is permitted to ask an applicant or employee questions about his or her diabetes; types of reasonable accommodations employees with diabetes may need on the job; and how an employer should handle safety concerns about people with diabetes in the workplace.

Summary of Federal Laws Prohibiting Job Discrimination - Did you know that small employers are exempt from ADA and ADEA? This EEOC website summary provides an easy to understand summary of all of the federal laws governing employers and job discrimination, and includes frequently asked Questions & Answers.

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"Behold, a virgin will be with child and bear a son, and she will call His name Immanuel (God is with us)." - Isaiah 7:14

 

Merry Christmas from Strategy Advisor News !!!!!!

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This newsletter is in no way to be construed as investment advice or an offer for the sale of insurance products or investments in unauthorized states or countries. All material presented is meant for general illustration and/or informational purposes only and it is not to be construed as compliance, reimbursement, tax, legal or investment advice. Although the information has been gathered from sources believed reliable, individual situations can vary; therefore the information should be relied upon when coordinated with individual professional advice. Healthcare Benefit Advisors, LLC, has agents licensed and authorized for life and health insurance in AL, FL, GA, NC, OK, SC, TN, TX, VA and WV.  Email inquiries to Publisher@StrategyAdvisorNews.com for more information.