The Need to Introduce Flexible Benefit Plans for Employees

The employees of straightaways workforce atomic number 18 divers. With such a workforce at hand, an employer moldiness guard a limber gather pattern to match the composition of its employees. elastic upbeat programmes are a written plan under which employees of a follow are allowed to learn two or to a greater issue arrive ats consisting of cash and qualified advantages (Everett & Miller, 1994). some(prenominal) wellbeings offered under a pliant value plan are wellness sustenance, dental, reimbursement accounts, vivification insurance, possibilityal stopping phase and dismemberment reporting, semipermanent dis top executive, vacation, retirement savings, spouse accidental death and dismemberment coverage, and dependent care (Kleiner & Sparks, 1994).A young couple can be assured that their tricks non nonwithstanding get a line the daily needs of their growing family, and that their children are covered for truly lilliputian apostrophize in their ow n employer-provided hospitalisation and health care insurance. A actor employed by the uniform organization, coming retirement, can choose wellbeings that lead maximize his/her retirement income as much as thinkable. With his/her own children grown-up, he/she needs to insure only to his/her own needs.Also cognise as cafeteria plans, the organization offering a choice of applic adequate benefits to their employees ensures that the benefits for which they redress are the most useful for each of their employees. damage are rising in to the highest degree every area of benefit grooming and administration. The organization is able to secure to a greater extent favorable rates for those benefits used, if the organization is non required to provide the same operate to each employee (Webster, 1996).Employee benefit plans have had a long history, and can be traced suffer to 1794, when the freshman profit-sharing plan was created by Albert Gallatin in his glassworks in Pennsy lvania (Kleiner & Sparks, 1994). other renowned benefit plan includes those made by theAmerican Express Company in 1875 with the first private pension plan, and the first host annuity contract issued in 1921 by the Metropolitan Life amends Company (Kleiner & Sparks, 1994). These early benefit plans were only the beginning of the benefit packages. As it turns out, the sociable Security Act of 1935 gave employees across the clownish a legal framework that support the development of many forms of employee benefits.Very hardly a(prenominal) employers provide full family health care coverage at no cost to the employee in todays world, tho everyone can save when they provide that coverage only to those who need it. Even though the employee almost always shares the cost now, the employer close up provides the major portion of the cost of health care insurance. In todays increasingly competitive business climate, everyone is hale to operate as efficiently as possible.The advantag e to the organization and employees of having a plastic benefit plan is clear. Businesses are non required to pay for services its employees will never seek. For instance, pediatric care was provided across the board in one organization, a significant numbers of the companys leadership were well past the point of needing that type of coverage for their family (Webster, 1996). Flexible benefit plans can be a very important tool for recruiting new employees and retaining genuine employees. Also, the be of administering such plans may be offset to a large extent by the payroll valuate savings generated when employees convert previously taxable hire and income into a nontaxable fringe benefit tax (Everett & Miller, 1994). Flexible benefit plans in any case provide the employee with the advantage of being able to ensure that benefits chosen are those that exceed meets their needs.The primary advantage of flexible benefit plans is that the employer and employee receive certain tax advantages. This depends on the types of programs the employee chooses. In somecases, the employee may choose cash rather than any benefits at all, but that option is dependenton company policy. For instance, many companies offer pay in lieu of off the job vacation time, but other companies maintain that employees take their accrued vacation time.Another advantage of flexible benefit plans is the ability of the organization to shift some of the cost of benefits to the employees who use them, while simultaneously offering tax advantages in other areas such as 401K plans. Any benefit that is not paid in cash, but is enured as such, is taxable to the employee, but the employee tax liability decreases the employers.Any benefit that does not satisfy the nondiscrimination clause of the Internal tax revenue code is taxable (Webster, 1996). Other benefits are nontaxable either to the employee or to the employer. To be nontaxable, the benefit must be a qualified benefit under fragment 1 25. Such qualified benefits include accident or health plans, disability benefits, accidental death and dismemberment benefits, the first $50,000 of convention term life insurance, a group dependent care assistance plan, and a group legal services plan (Webster, 1996).A disadvantage of flexible benefit plans is that employees are often overwhelmed by the legion(predicate) choices a plan may have to offer. In many cases, companies are catching accountants, financial planners, investment counselors and other consultants to assistant employees wade through the vast set up of options (Jurek, 1995). Such consultant use increases the employers costs of providing the flexible benefits plans, but employers believe the management is needed. As for the IRS, it only requires organizations make flexible benefit plans available to all employees, not explain the intricacies of all options.Employers that provide flexible benefit plans show the desire to in increase employees loyalty to the c ompany. In an increasingly tight labor market and face with the necessity of operating as efficiently as possible, in order to outride competitive, employers view the flexible benefit plan as a tool to kick upstairs employee morale. Flexible benefit plans are similarly used to improve employer-employee relationships, reduce general costs of providing benefits, and reduce the incidence of employee turnover rate (Leonard, 1994). Replacing an employee can cost more than the annual salary of that employee, so it is to the employers advantage to retain as unchangeable a workforce as possible (Leonard, 1994).From both the employer and the employee point of view, flexible benefit plans make sound financial instinct (Kleiner & Sparks, 1994). These plans provide a way for employers to visit and budget benefit cost. At the same time, it is also a way for employees to grow their benefits while paying expenses with pre-taxed dollars.