Small Businesses with PEOs’ ‘Cafeteria Plans’ Give Employees Incentive to Seek Healthcare When Needed

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Small businesses can give their employees an incentive to seek medical care and purchase prescription drugs and over-the-counter (OTC) remedies, even with the trend toward higher deductibles, according to experts at the National Association of Professional Employer Organizations(NAPEO). Those businesses that work with professional employer organizations(PEOs)can use “125 cafeteria plans,” which provide a tax advantage for employees who meet their healthcare costs with pre-tax dollars.

Small businesses can give their employees an incentive to seek medical care and purchase prescription drugs and over-the-counter (OTC) remedies, even with the trend toward higher deductibles, according to experts at the National Association of Professional Employer Organizations (NAPEO). Those businesses that work with professional employer organizations (PEOs) can use “125 cafeteria plans,” which provide a tax advantage for employees who meet their healthcare costs with pre-tax dollars.

While cafeteria plans will not stem the cost of healthcare and insurance, they will help employees offset these costs by lowering their taxable income each year and enabling them to be reimbursed with pre-tax dollars for eligible out-of-pocket medical expenses. That could make it easier for employees to seek the care they need, rather than defer it as 40 percent say they are doing now.*

Under the IRS Code Section 125 that defines cafeteria plans, employees can elect to regularly deduct nontaxable health benefit costs they’ve agreed to cover, thus reducing their taxable income. Most PEOs have established a cafeteria plan for the workers at their small-business work sites. It is only through a PEO that most workers at small businesses have access to quality benefit plans such as 125 cafeteria plans. Without the PEO, most small businesses lack the expertise to establish and administer such a program.

“This is a tremendous service to small-business owners and a major benefit to workers,” said Milan P. Yager, executive vice president of NAPEO. “The PEO’s cafeteria plan gives small businesses and their employees a big-business benefit and may encourage employees to seek the care they need, when they need it.”

Employers also can establish a “flexible spending account” (FSA). An FSA allows employees to set aside money from their pay before taxes are withheld, thereby reducing federal income and social security taxes. The healthcare account reimburses the employee for healthcare expenses not covered or only partly covered by medical and dental plans. The employee submits a reimbursement form and receipt for an eligible expense after paying for it.

Administration of a cafeteria plan could boggle the mind of the small-business owner. The PEO can provide the expertise and systems to make this plan a reality for the nearly 23 million small businesses in America today – good news for their workers beset with rising medical costs. “Most Americans like working on Main Street,” Yager commented, “but desire the benefits offered on Wall Street.”

NAPEO, the National Association of Professional Employer Organizations, is the recognized “Voice of the PEO Industry.®” NAPEO has 345 PEO members found in all 50 states, representing more than 70 percent of the industry's revenues. Professional employer organizations enable clients to cost-effectively outsource the management of human resources, employee benefits, payroll and workers’ compensation. PEO clients focus on their core competencies to maintain and grow their bottom line. To learn more about the PEO industry and how PEOs contribute to small businesses’ success, visit the NAPEO Web site: http://www.napeo.org

NAPEO

901 N. Pitt Street, Ste. 150

Alexandria, VA 22314

Phone: (703) 836-0466    

Web Site: http://www.napeo.org

Alexandria, VA 22314

Phone: (703) 836-0466    

Web Site: http://www.napeo.org

This press release was distributed through eMediawire by Human Resources Marketer (HR Marketer: http://www.HRmarketer.com) on behalf of the company listed above.

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Edie Clark
NAPEO
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