Though US economy is officially in recovery mode, austerity still rules the day for both businesses and their employees. Wages are stagnant, increased regulations have sent health insurance premiums through the roof, childcare costs are skyrocketing and people are always looking for ways to stretch their income as far as it will go.
There are a number of pre-tax spending accounts that firms can offer their employees as a way to save money on important expenses, but given the variety of those accounts, the legal ramifications of each type and the restrictions on how to use them, it can be overwhelming both employers and employees to get a handle on everything.
The Benefits of Pre-Tax Accounts
Pre-tax spending accounts allow employees to funnel money into savings accounts for specific expenses. The most popular are Health Savings Accounts (HSA) and Flexible Spending Accounts (FSA) for childcare. Because those deductions are taken out before taxes, it reduces taxable wages – an outcome that benefits both employer and employee.
Why Choose To Offer Spending Accounts?
Employees don’t always understand the benefits of choosing a flexible spending account. In essence, it forces the employee to save money for expenses like healthcare and childcare. Each pay period, a certain amount of money is funneled directly into the account. At any time, they can use the balance to pay for what would otherwise be out-of-pocket healthcare expenses like copays, prescription drugs, dental bills, eyeglasses and vision checks, emergency room visits, and more, depending upon the rules of the individual plan. Dependent Care FSAs can be used to pay for childcare, elder care, or services for any disabled dependent. Because the money has been payroll deducted, unforeseen expenses are typically much easier to manage with a pre-tax spending account.
Benefits To A Company’s Bottom Line
HSAs and other FSAs can benefit employees, but they also have benefits for the companies that offer them. Depending on how the plan is set up, companies may be exempt from or experience a reduction in FICA taxes, federal unemployment taxes and other taxes. State and local taxes are also very often reduced, but these benefits can vary greatly from location to location.
Spending accounts can also be used by hiring teams in the recruiting process. These accounts allow employees to pay into health and childcare benefits programs like they always would, but allow them to pick and choose exactly where they will spend their money. Given the fact that so many choices in healthcare and childcare have been taken away from consumers over the last few years, any control that can be given back to an employee can be seen as an advantage.
Today’s unique economic climate requires companies to think outside the box when it comes to managing costs and taxes. If your company is seeking top accounting and finance talent to help you get maximum benefits to your bottom line, contact the expert A&F recruiters at Contemporary Staffing Solutions today.