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Posts made in April, 2019

Many employers have discovered the benefits of offering their workers premium-only plans (POP), which allow employees to pay their health insurance premiums with “before tax” dollars. This means the premiums are deducted from paychecks on a pre-tax basis, saving them money. Of course, as with any other tax code provision, employers are subject to strict regulations when opting for POPs. In particular, the law states that the plan must be non-discriminatory, meaning the plans cannot discriminate in favor of key or highly-compensated employees with regard to eligibility, contributions, or benefits. If the plan’s design benefits a reasonable cross-section of employees, and enrollment is available to all, the plan will most likely pass eligibility and benefits standards. Keeping the plan simple and uniformly available will cut down on the number of tests that the employer must pass. Therefore, in these cases employers only need to worry about the Concentration Test and Dependent Care Test. The Concentration Test states that the non-taxable benefits received by “key employees” must not exceed 25 percent of benefits received by all employees in total. First, we must define key employees, according to IRC 416 (i): Officers of employer who earn more than $160,000 annually Those with at least one percent ownership in the company who earn more than $150,000 annually Those with more than five percent ownership in the company Then, the test formula simply divides the total benefits of Key Employees by the total benefits received by all employees. If the resulting percentage is greater than 25 percent, the plan fails the Concentration Test. The remedy is fairly simple: Key employees must simply pay more of the cost of benefits on an after-tax basis, in order to keep their percentage of benefits below 25 percent. Employers should run the Concentration Test regularly to ensure continuous compliance with the law. Certain special rules do apply, regarding ownership percentages with regard to spouses or family members of key employees. In these cases, professional guidance is essential. For more information on non-discrimination testing and POP plans, please contact us and we’ll be happy to...

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It’s April, and that means tax refund season has arrived once again. Yes, a vacation or new furniture sounds tempting, but you might be wondering about ways to put your tax refund to its best use. We have a few suggestions that can help secure your financial future. Consider Life Insurance Whether you already have a life insurance policy, or you’ve been considering this important coverage, you know that the point is to offer long-term security to your family in the event that something happens to you. But many people face obstacles in securing a life insurance policy, such as: Fitting the monthly premiums into their budgets Remembering to pay premiums (and if you forget, your coverage could lapse) Wondering if they really have enough life insurance, especially when situations changeBy enrolling in a life insurance policy now and using your tax refund to cover the next year’s premiums, you can address all of these issues. Contribute to a Health Savings Account (HSA) If you have out-of-pocket medical costs, you can start or contribute to an existing HSA and use that money for future medical bills. One nice benefit of an HSA is that the money you contribute is tax exempt. So not only do you save for expenses, but you also cut your tax liability. We can answer questions for you regarding HSAs and also help you to start one. Contribute to a Roth IRA You can contribute up to $5500 per year to a Roth IRA and this money will grow tax free. If you are married, both you and your spouse can contribute $5500 to a Roth IRA. When you retire, the funds in your Roth IRA can be withdrawn without any tax liability, making a Roth IRA an advantageous retirement income source. For more information on any of these solutions, please give us a call. We can help you decide what makes the best sense for you and your family and can answer any questions that you might...

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