Health Care Coverage for Non-Eligible Part-Time Employees
Under Massachusetts health care reform, employers with 11 or more full-time
equivalent employees must give their qualifying part-time employees not
covered by their employer's plan the option of directly purchasing health
coverage on a pre-tax basis through an employer's Section 125 plan.
Create Opportunity, Not More Paperwork
Benefit Concepts can help you set up
a special Section 125 plan and Premium
Reimbursement Account (PRA). These
plans work together simply and easily
to enable your part-time employees to
pay for their health coverage on a
pre-tax basis without creating additional
administrative hassles for your
organization.
This will not only help you
avoid the potential employer
penalties that are part of
health care
reform, but it
will also allow
both you
and your employees
to save on taxes as your
employees direct some of
their paycheck to buy
health
care on a pre-tax
basis. |
What is a Premium Reimbursement Account?
A Premium Reimbursement Account (PRA) is similar to a dependent care Flexible Spending Account (FSA). Simply put, it's an account that allows those employees who are not eligible for employer-sponsored health coverage to set aside some of their paycheck on a pre-tax basis to pay for health care premiums. |
|
The Benefits of a Premium Reimbursement Account
- Simplified administration. Employees submit claim forms for
reimbursement directly to Benefit Concepts, taking the employer out of
the middle of the transaction
- Reduces employer's taxes. Employees' incomes are reduced by the pretax
contributions, cutting employer's FICA and federal taxes (see
example below)
- Compliance with health care reform. Setting up a Section 125 plan with
a PRA meets employer requirements and protects employers from the
Free Rider provision
- Increases employees' purchasing power. Because employees don't pay
taxes on their contributions, the cost of health insurance they purchase
on their own is effectively lowered
How it Works
Benefit Concepts will work with you to set up your account, employee salary
reduction agreement, and arrangements to transfer the funds your employees
have set aside from their paychecks.
Once your employees have enrolled in health coverage, they'll file
reimbursement requests with Benefit Concepts for premiums paid from the
account. Validating reimbursement requests, administering payments to
employees, and responding to PRA questions will be managed directly by
Benefit Concepts, freeing you from the administrative tasks. You will only pay
the small monthly maintenance and per-employee fees directly to Benefits
Concepts. These are typically offset by your tax savings (see example).
If you would prefer to manage the whole process yourself or through another
service company, Benefit Concepts will provide an online tutorial to help you
set up and administer your PRA.
Tax Savings Example Employer |
| Annual estimated per-employee pre-tax premium paid by |
|
| employer ($200/month) |
$2,400 |
| Annual employer FICA payroll tax savings (7.65%) |
$183.60 |
| Number of enrolled part-time employees |
50 |
|
| Total estimated annual employer tax savings |
$9,180 |
| Estimated annual fees |
$3,150 |
|
| Annual net savings |
$6,030 |
| |
|
Employers, to Get Started, download and complete the "PRA Employer Package" PDF forms.
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