Employee Benefit Coverages
Insurance coverages that can be used to provide employee benefits include group
life insurance, group health insurance, disability insurance, and retirement
income. Key employee insurance protects the company against financial loss
caused by the death of a valuable employee or partner.
Group Life Insurance
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No Action Needed |
Look into this |
| 1. |
If you pay group insurance premiums and cover all employees up to
$50,000 the cost to you is deductible for federal income tax purposes and yet
the value of the benefit is not taxable income to your employees.
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| 2. |
Most insurers will provide group coverage at low rates even if
there are 10 or fewer employees in your group. |
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| 3. |
If the employees pay part of the cost of the group insurance state
laws require that 75 percent of the employees must elect coverage for the plan
to qualify as group insurance.
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| 4. |
Group plans permit an employee leaving the company to convert
group insurance coverage to a private plan at the rate for his or her age
without a medical examination within 30 days after leaving the job.
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Group Health Insurance
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No Action Needed |
Look into this |
| 1. |
Group health insurance costs much less and provides more generous
benefits for the worker than individual contracts do.
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| 2. |
An employer pays the entire cost for group health insurance. Individual
employees cannot be dropped from a group plan unless the entire group policy is
canceled.
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| 3. |
Generous programs of employee benefits such as group health
insurance tend to reduce labor turnover.
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Disability Insurance
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No Action Needed |
Look into this |
| 1. |
Workers' compensation insurance pays an employee only for time
lost because of work injuries and work-related sickness -- not for time lost
because of disabilities incurred off the job. But an employer can purchase, at a
low premium, insurance to replace the lost income of workers who suffer
short-term or long-term disability not related to work.
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| 2. |
You can get coverage that provides employees with an income for
life in case of permanent disability resulting from work- related sickness or
accident.
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Retirement Income
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No Action Needed |
Look into this |
| 1. |
If you are self-employed you can claim an income tax deduction for
funds used for your and your employees' retirement through insurance or
annuities approved for use under the Employees Retirement Income Security Act
of 1974 (ERISA).
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| 2. |
Annuity contracts may provide for variable payments in the hope of
giving the annuitants some protection against the effects of inflation. Whether
fixed or variable the annuity can provide retirement income that is guaranteed
for life.
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Key Employee Insurance
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No Action Needed |
Look into this |
| 1. |
One of the most serious setbacks that a small company can incur is
the loss of a key employee. But your key employee can be insured with life
insurance and disability insurance owned by and payable to your company.
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| 2. |
Proceeds of a key employee policy are not subject to income tax
but premiums are not a deductible business expense.
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| 3. |
The cash value of any key employee insurance that accumulates as
an asset of the business can be borrowed against and the interest and the
dividends are not subject to income tax as long as the policy remains in force.
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This article is reprinted by permission of the SBA and The Travelers, Hartford, Connecticut.
For more information on SBA programs go to www.sba.gov
