Let’s face it: The benefits package that you provide your employees is very expensive, and most of your employees take it for granted. To top it off, the 2018 tax law reduced the amount of deductions that an employee or business can take.
With the increasing cost of the different coverages you provide, you have to keep making changes to the plans. You have to increase your deductibles, copays, coinsurance, and out-of-pocket costs, not to mention the monthly employee premium contribution just to have the coverage. You also have to consider moving to a high-deductible plan with a health savings account (HSA) for the medical plan. Then you have to decide if you as the employer are going to contribute to the HSA account. These changes are not always welcomed with open arms by your staff.
Both employers and employees want to reduce their costs, and also meet budgetary needs.
- Employers are looking for ways to offer their key employees a benefit that they will truly appreciate. Employers are also looking for good recruiting tools to attract employees and keep them.
- Employees expect good Medical, Dental, and Vision plans that leave them with little to no out-of-pocket exposure and don’t require them to contribute a lot of money towards the monthly premium. Employees are finding it harder and harder to deduct any of their Medical, Dental or Vision out-of-pocket expenses.
It seems these two wish lists might never be fulfilled. But, there is a way you can offer your employees a benefit that gives them 100% reimbursement for the out-of-pocket expenses covered by the plan.
The plan is called a Medical Expense Reimbursement Plan (MERP).
A MERP benefit is a tax deduction for you, the employer, and it is not taxable to the employee. (Consult with your tax accountant.) A MERP is considered an excepted benefit under the Affordable Care Act (also called ACA, PPACA or Obamacare). This means that it is a legal way to make a select group of employees whole in regards to their out-of-pocket charges under your Medical, Dental or Vision plan — and you could get a tax deduction for it.
These plans are considered better coverage than standalone voluntary plans like cancer, critical illness, or hospital indemnity plans because you don’t have to meet strict criteria. Under those voluntary standalone plans, if you don’t contract a specific disease, the plan does not pay out any benefit, and you lose the premiums that you paid.
To start the plan, you would define a class of employees to be included under the medical expense reimbursement plan. You would then determine the level of benefit for each employee covered under the plan. The MERP can be started the first of any month and it does not have to run on the same plan year or renewal dates of your current Medical, Dental or Vision plan.
Let us show you how to:
- Give your key employees a benefit they will truly appreciate.
- Potentially deduct the full premiums as a business expense. (Check with your accountant.)
- Reduce your recruiting expenses by attracting and retaining high-quality employees.
Give us a call today.
Edward C. Briggs, ACBC