Many family businesses try to balance the need to control wages with the need to pay experienced people in key positions. Other than wages, nothing affects employees as much as benefits. The trend in employee benefits budgeting is similar to budgeting in other areas focusing on defraying or increas-ing costs to employees. One way to do this without cutting employee coverage is to pro-vide a menu of benefits and allow employees to pick and choose. A Section 125 cafeteria plan allows employees to pay for their costs with pre-tax dollars. But you must be careful in this area.

Section 125 cafeteria plans have been imple-mented by medical insurance companies without sufficient documentation and instruc-tion to the business. If you have implemented such a plan without informing your CPA firm, call them immediately. Cafeteria plans reporting requirements and other rules are often overlooked. In addition, if your com-pany is an S corporation, partnership or lim-ited liability company (LLC), special rules apply to cafeteria plans that cover owners.

Employee benefit plans can be designed to give all employees a budget that will allow them to pick benefits that are right for them. Many family business consultants specializ-ing in employee benefits agree that employee benefit programs provide overlapping bene-fits or benefits that some employees do not need or want. Effectively structured benefits programs focus on providing the best benefits at the lowest cost for both employer and employee. Many benefits consultants take a holistic approach to employee benefits. Using a questionnaire and an employee cen-sus, they pinpoint areas of waste and design programs that meet the needs of every employee without increasing costs.

How To Avoid Overlapping Coverage
For example, an employer provides family medical coverage for all employees, but many of the employees are covered under their spouses’ benefit plans. Providing family cov-erage for everyone can cause overlapping and adds expense with no additional benefits to many of the employees. To avoid overlap-ping coverage, many employers provide benefit options the employees choose according to their needs.

Employers can also require employees to contribute part of the medical coverage costs, regardless of the type of coverage they use. Employees are given the option to forego coverage, reducing the cost of unnecessary insurance. This reduces a company’s benefit costs and allows money to be allocated to other employee benefits. Employees forgoing medical coverage can instead select another benefit, such as disability insurance The employee will spend the same amount of money on benefits that are tailored more to his or her own needs.

Other benefit options could include dental insurance, vision coverage and life insurance. The employee can change benefits each year depending on his or her current needs and any changes in health, marital, or family status.

Review Your Benefits Program
Benefits consulting is an ongoing process. Every time a new group of employees comes in, you may need to restructure your pro-gram. Build in flexibility so your program can change as the demographics of your group of employees changes. In these days of full employment, employees have choices. Make sure your benefits package is structured both cost effectively and in a way that will help you attract and keep good employees. Call us to discuss your benefits program. We would be happy to help you make it work for you.