An Overlooked Benefit for Hiring and Retaining Key Employees
By Tom Jocz, Senior Employee Benefits Practice Lead
In today’s competitive labor marketplace, employers are exploring new and creative benefits to find and keep great employees. The cost of doing business is rising, insurance costs are a top 3 expense, and benefit programs are shifting more costs on to employees. How are you retaining the key people in your business without breaking the bank? Paying for out-of-pocket expenses for key personnel, the executive team, or an owner is one option!
Resourceful businesses are competing for key personnel through a seldom-used benefit that takes advantage of IRS Code 213. Code 213 allows for the deduction of medical and dental expenses once those out-of-pocket costs rise above 7.5% of an individual’s income. The trick is, most people don’t incur that much expense, even though high deductible plans do take a big bite out of one’s pocket.
Employers are taking advantage of the program that allows a business to select ‘specific’ employees and cover those same out-of-pocket expenses that an employee may incur. These expenses include deductibles, co-insurance, co-pays, out-of-pocket maximums, dental and vision expenses, and more. Employers are not only targeting current staff for this type of benefit but are offering these perks to their executive team members or when attracting outstanding candidates.
The advantage to the employee is that their benefit package just got a whole lot richer with possibly no out-of-pocket costs on their benefit plan and they avoid any pass-through income. The employer has an outstanding perk to offer while only paying for expenses incurred AND these costs are tax-deductible for the business.
Owners of companies can take advantage of this benefit as well. Specifically, owners of S-Corporations take benefits that are paid through the business as pass-through income. This program can avoid any pass-through income on benefits paid.
Owners in C-Corporations and LLCs can also take advantage of this program for themselves and their partners. The business can cover some or all of the out-of-pocket costs for an owner or ownership group that would have been the responsibility of that individual under ‘normal’ benefit programs. This too would be tax deductible for the business.
The bottom line is this is a way to enhance a benefit offering for key personnel, owners, or an outstanding candidate you’re looking to hire without adding a significant expense onto the company. Reach out to your benefit consultant to see if your business may be able to take advantage of this creative option.