small business finance

Health and Medical Insurance FAQ’s for Employers

Scarsdale accountant Paul Herman has all the answers to your personal finance questions! Health Insurance tips for employers from Scarsdale tax preparersAs advisors to many businesses, we are frequently addressed with the following common questions regarding health and medical insurance for employees.
▼ Are there different types of medical plans for employees?

There are two options: a fee-for-service plan, or a pre-paid plan (commonly referred to as a Health Maintenance Organization, or HMO).

An indemnity plan or insurance permits each employee to decide their own doctor. The employee will pay for the medical care and then file a claim with the insurance company for reimbursement. There are deductibles and coinsurance as well. Deductibles vary from $100 to $1000 a year.

With coinsurance, a percentage of the medical expenses are paid by the employee and the remaining are covered by the plan. 20 percent is the normal coinsurance amount to be paid by the employee – the remaining 80 percent is paid by the plan.

There are three common indemnity plans that give health care to groups of employees: 1) a basic health insurance plan that will cover hospitalization and surgery as well as physician’s care in the hospital; 2) an insurance plan that will supplement the basic plan by reimbursing the charges not paid by that plan; and 3) a comprehensive plan that (with one common deductible and coinsurance features) will cover both hospital and medical care.

▼ What is a preferred provider organization (PPO)?

A network of doctors and/or hospitals that has contracts with a particular health insurer or employer that will give health care to employees at lower than the market rate. This offers a broad range of health care providers.

PPOs can be more expensive than HMOs due to the broader range of providers. There are no obligations to use the PPO providers, but there are strong financial incentives. PPOs often have less comprehensive benefits when compared to HMOs. The PPO providers normally receive payment from the insurers directly.

▼ What is a health maintenance organization (HMO)?

Health care that is provided through a network of hospitals and doctors is a health maintenance organization (HMO). The benefits usually include preventative care, such as physical examinations, weight control and stop-smoking programs, baby care and immunizations. The most common characteristic of HMOs is that the primary care provider is limited to only one doctor within a network, although there is usually a variety to choose from.

Outside of the network of hospitals and doctors of the HMO, there is no coverage. Due to the limited choices, the costs are lower. The payment for the HMO premiums are fixed and per employee. A small co-pay is due for the medical services, and no reimbursement is necessary.

▼ What are the typical disability benefits provided to employees?

If an employee cannot work due to illness or accident, the disability plan gives him/her income replacement. These defer from worker’s compensation as they pay benefits for non-work related illness and injury, and can be either short-term or long-term.

Short-term disability (STD) is used if the employee is unable to perform the normal duties of his/her occupation. The benefits are typically paid for a maximum of 26 weeks and begin on either the first or the eighth day of disability. The benefit level is dependent upon the employee’s salary and will range from 60 to 80 percent.

Long-term disability (LTD) commences after the conclusion of the short-term benefits. LTD benefits then continue for the entire length of the disability or until the date of normal retirement. This is also a percentage of the employee’s salary, typically between 60 and 80 percent. Social Security disability normally offsets these benefits – if an employee qualifies for the Social Security disability benefits, they will be subtracted from what the employer has paid.

Our Scarsdale tax preparers are here to help you with all your personal finance needs. Please contact us for all inquiries and to receive your free personal finance consultation!

Herman and Company CPA’s proudly serves White Plains NY, Mamaroneck NY, Larchmont NY, Purchase NY, Rye NY, Scarsdale NY and beyond.

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Employee Benefits as a Small Employer

Scarsdale CPA Paul Herman of Herman & Company CPA’s has all the answers to your personal finance questions!

As an employer, it’s important to understand the ins and outs of benefits that you can offer to your employees. The employer must pay for certain legal benefits and insurance coverage such as Social Security, unemployment insurance and worker’s compensation. Tips for small businesses and employee benefits from scarsdale accountantThe money for the Social Security program comes from payments made by employers, employees and self-employed persons to an insurance fund that will provide income after retirement. At the age of 65, full retirement benefits usually become available. There are other aspects of Social Security that deal with survivor, dependent, and disability benefits, Medicaid, Supplemental Security Income and Medicare.

Benefits for unemployment insurance are to be paid under the laws of individual states from the Federal-State Unemployment Compensation Program. Contributions to the program include payments made by the employer, based on the total payroll. The purpose of worker’s compensation is to provide benefits to workers who are disabled due to an illness or injury while at work. The coverage and benefits vary by state. In the majority of states, private insurance or employer self-insurance will provide the coverage necessary. Short-term disability benefits are governed by the state also.

Health insurance, disability insurance, life insurance, a retirement plan, flexible compensation, and leave are often included in a comprehensive benefit plan. An employer may choose to offer such benefits as bonuses, reimbursement of employee educational expenses, service awards, and perquisites appropriate to employee responsibility.

You need to determine what you are willing to pay for this coverage before implementing a benefit plan. It might be a good idea to consult employees as to what benefits they are seeking. For example, is a retirement plan more important than a medical plan? Another decision is whether you will protect your employees from current economic hardships or in the future. The last step is deciding who will manage the plan, you or an insurance broker.

Our Westchester tax preparers are here to help you with all your personal finance needs. Please contact us for all inquiries and to receive your free personal finance consultation!

Herman and Company CPA’s proudly serves Larchmont NY, Katonah NY, Briarcliff Manor NY, Mount Kisco NY, Scarsdale NY and beyond.

Travel and Entertainment FAQs

Scarsdale tax preparers at Herman & Company CPA’s have all the answers to your personal finance questions! business expenses with travel tips from scarsdale accountantThe following is a list of FAQs I receive in regards to business expenses, travel and entertainment:
May I deduct meal expenses when visiting clients out of the office?

That is not common. Normally, you can only deduct the cost of a meal when away on a business-related trip or gone overnight.

Only 50% of the cost of the meal including the tip is allowed in the deduction.

▼ Do I need to report employer reimbursements for travel, entertainment and meals?

If you give back any excess reimbursement, provide your employer with a detailed expense report and meet other requirements. There is no need to report the reimbursement or to deduct the expenses.

Deduction limits are obligatory for your boss, not you, and the limit of 2% on miscellaneous item deductions will not have an effect on your entertainment, travel and meal costs.

▼ Are there limits on deductible entertainment, travel and meal costs?

Although there is no specific dollar limit, expenses should be ordinary and necessary and not over-generous.

The deduction cannot exceed 50% of the cost of business entertainment and meals.

For skyboxes and luxury water travel, there are other specific limitations.

▼ May I deduct living expenses while away from home on temporary assignment?

Because temporary work site living expenses are separate from home travel expenses, they may be deducted.

An assignment that is not expected to last more than a year is considered temporary. If the assignment is for more than one year than the new area becomes your tax home and you can’t deduct expenses as away-from-home travel.

▼ Which expenses are deductible when I am traveling away from home?

There is a broad range of expenses that you can deduct while traveling. The most common are as follows:

  • Accommodation and meals (where there is a 50% limit on meals)
  • Transportation fees or actual costs at a per-mile rate for using your own vehicle. The transportation costs also include getting around in the work area, commuting to and from hotels, restaurants, offices, terminals, etc.
  • Phone, fax, laundry, baggage handling
  • Any tips related to the above
▼ Are there travel expenses that cannot be deducted?

The travel expenses below cannot be deducted:

  • Travel as education
  • Looking for a new job in a different field or for a new business site
  • The cost of transportation between your home and the work site unless your home is your business headquarters.
▼ Business entertainment – what can I deduct?

The conditions and limitations for business and entertainment deductions are the following:

  • A business discussion should be held before, during or after the entertainment.
  • Usually, the deduction is limited to 50% of the cost for entertainment and meals.
  • In settings where spousal attendance is customary, expenses of spouses of business associates (and your own spouse) can be included in the deduction.
  • There are more limitations for club dues, entertainment facilities and skyboxes.
▼ How do I document my entertainment and travel expenses?

If your employer is reimbursing you for your expenses, you only need to prove them to him/her. To do this, submit a written accounting to the employer and return any excess amounts.

“Accountable plans” or per diem arrangements and mileage allowances are used instead of detailed accounting for the employer, if place, time, and business purpose are verified.

Detailed documentation is required by the IRS when expenses aren’t fully reimbursed by the employer or you fail to return excess reimbursements. If you are the employee, a 2% floor on miscellaneous item deductions is applied to your deductions.

You should record the expenses as close to the time of expenditure as possible.

Our Westchester CPA firm is here to help you with all your personal finance needs. Please contact us for all inquiries and to receive your free personal finance consultation!

Herman and Company CPA’s proudly serves Mamaroneck NY, Bedford NY, Purchase NY, Scarsdale NY, Mount Kisco NY and beyond.

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Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.