Outsourcing with a Section 125 Plan Administrator vs. Administering In-house

You can make an argument for either outsourcing Cafeteria Plan Administration or administering internally.  I wanted to take a moment to discuss this very debate and shed light on why an employer should outsource with a qualified Section 125 Administrator.

Outsourcing has been a valuable strategic management tool for decades.  But in today’s highly competitive and ever widening global marketplace, more emphasis is being placed on the advantages that outsourcing can give an organization.

The driving force behind the decision to outsource is the ability to allow your organization to focus on what you do best: core competencies, delivering a quality product or service.  Outsourcing allows you to redirect focus to your revenue driven processes and not on back-office cost center functions.  Outsourcing will allow your organization to be more efficient, more effective, and reduce overall costs.

Outsourcing opens up the doors for your organization to gain access to top-level professionals in your non-core areas, state of the art technology, industry defined best practices, and stay up to date on compliance and legal updates.

Partnering with a qualified Section 125 Administrator such as BusinessPlans, Inc. will allow your employees to access their individual account information 24-hours a day, seven days a week from anywhere in the world.  As an employer, you also gain 24-hour Internet access.  You may query reports and check the status of your plan around the clock when you want and need information.

In essence, offering self-service to your employees gives them the feeling of control while at the same time reducing the company’s cost for personnel wages, technology, and supplies and boosting employee morale.  This is a win-win situation for you and your employees.

A pre-tax 125 Cafeteria Plan in Ohio or elsewhere will save you FICA taxes, strengthen your benefits program, and save employees 17% to 40% in taxes (depending on their income tax bracket).  Plus, you can do so with little or zero out-of-pocket dollars.

IRS code allows for employers to implement a pre-tax Section 125 Cafeteria Plan, which allows for unreimbursed insurance expenses to be paid pre-tax.  Examples include insurance premiums, doctors office co-pays, prescription co-pays, eye exams, eye glasses, contact lenses, laser eye surgery, orthodontics, and more…

You may choose to administer in-house or to ease your workload and comply with IRS regulations outsource your cafeteria plan administration.

Section 125 of the IRS code allows for employers to implement a pre-tax Section 125 Cafeteria Plan, which allows for unreimbursed insurance expenses to be paid pre-tax.  Examples include insurance premiums, doctors office co-pays, prescription co-pays, eye exams, eye glasses, contact lenses, laser eye surgery, orthodontics, and more…

Employers may choose to administer such a plan in-house or outsource with a Cafeteria Plan Administrator.

Outsourcing through a Cafeteria Plan Administrator vs. Administering In-house

You can make an argument for either outsourcing Cafeteria Plan Administration or administering internally.  I wanted to take a moment to discuss this very debate and shed light on why an employer should outsource with a qualified Cafeteria Plan Administrator.

Outsourcing has been a valuable strategic management tool for decades.  But in today’s highly competitive and ever widening global marketplace, more emphasis is being placed on the advantages that outsourcing can give an organization.

The driving force behind the decision to outsource is the ability to allow your organization to focus on what you do best: core competencies, delivering a quality product or service.  Outsourcing allows you to redirect focus to your revenue driven processes and not on back-office cost center functions.  Outsourcing will allow your organization to be more efficient, more effective, and reduce overall costs.

Outsourcing opens up the doors for your organization to gain access to top-level professionals in your non-core areas, state of the art technology, industry defined best practices, and stay up to date on compliance and legal updates.

Partnering with a qualified Cafeteria Plan Administrator such as BusinessPlans, Inc. – myCafeteriaPlan.com will allow your employees to access their individual account information 24-hours a day, seven days a week from anywhere in the world.  As an employer, you also gain 24-hour Internet access.  You may query reports and check the status of your plan around the clock when you want and need information.

In essence, offering self-service to your employees gives them the feeling of control while at the same time reducing the company’s cost for personnel wages, technology, and supplies and boosting employee morale.  This is a win-win situation for the employer and employee.

There is also a wide range of additional benefits.  In a global economy rich with mergers, divestitures, and new business launches, outsourcing will help your company stay nimble to better manage business change.  Other indirect advantages of outsourcing include improving employee relations, increasing retention, decreasing turnover, reducing interviewing, hiring, and training costs. Did you know?

45% medium to large U.S. companies report that turnover costs them more than $10,000 per employee… and the average cost to recruit, hire and train a $50,000 a year employee is $18,750, according to survey in Workforce Magazine July 1998.

Every organization has limits on the resources it has available for use.  Outsourcing will allow your company to focus and redirect its resources; most often people resources, from non-core activities to profit gaining activities.

I’d like to discuss why you would look into cafeteria plan administration and more specifically focus on Cafeteria Plan Administration vs. Paying Employees Money Directly.  One can make an argument for either, but choosing Cafeteria Plan Administration has its advantages.

IRS code allows for employers to implement a pre-tax Section 125 Cafeteria Plan, which allows for unreimbursed insurance expenses to be paid pre-tax.  Examples include insurance premiums, doctors office co-pays, prescription co-pays, eye exams, eye glasses, contact lenses, laser eye surgery, orthodontics, and more…

Here are the facts:

• A Section 125 Cafeteria Plan is easy to implement
• You will be able to do so with little or zero out-of-pocket dollars
• It will save your company FICA taxes
• It’s an easy way for you to strengthen your benefits program and improve employee morale because it will save your employees 17% to 40% in taxes (depending on their income tax bracket)
• It’s a regulated benefit by the Internal Revenue Service (IRS)
• It will only allow for eligible medical, dental, vision, and daycare expenses to be run through the plan ensuring the plan is used properly.

If you were to simply add money onto an employees paycheck to cover such expenses, you don’t know how that money will be used.  For example, Bob could take his paycheck and stop by the local pub before heading home.  Truth be told, implementing the Section 125 Cafeteria Plan gives you control over these dollars to ensure they’re being used for out-of-pocket medical, dental, vision, and/or daycare expenses.

Note that you may implement a pre-tax 125 Cafeteria Plan and either administer in-house or outsource the ongoing administration.  If you’re looking for plan documentation or outsourced administration, contact BusinessPlans, Inc. by phone at 800.865.6543 or check out the myCafeteriaPlan.com