What Is a Fully Insured Fixed Indemnity Plan?
Most employers have never heard of a fully insured fixed indemnity plan. Those who have often assume it is just another insurance product that costs more than it delivers. It is not. When structured correctly under Section 125, a fixed indemnity plan reduces your FICA taxes, provides a potential increase in your employees take home pay, and provides a whole host of supplemental benefits for your employees and their families.
How Does It Reduce Payroll Taxes?
When a fixed indemnity plan is structured under Section 125, employees pay their premiums with pre-tax dollars. This reduces the taxable wage base for both the employee and the employer. The employer’s share of FICA taxes, currently 7.65%, is calculated on a lower wage base, generating real savings starting on the first payroll run.
For a company with 100 employees, this typically translates to $600 or more per employee per year in FICA savings for the employer.
What Do Employees Get?
- Virtual primary care and urgent care, available 24/7 with no copay or deductible
- Behavioral health support
- Comprehensive generic prescription coverage
- Monthly engagement activities that, when completed, trigger an automatic indemnity payment deposited directly into their paycheck
- Benefits that extend to their family members
- Access to a tax advice line
Does It Replace Existing Coverage?
No. The fixed indemnity plan sits on top of whatever benefits your employees already have. There are no changes to existing coverage, no carrier switches, and no disruption to your current plan design. It is additive by design.
What Does It Cost the Employer?
Because the premiums are paid on a pre-tax basis, employers may realize a reduction in FICA obligations beginning on day 1 of the plan, essentially saving up to $988 per employee per year. These results vary by employer and workforce – consult a tax professional for specifics applicable to your organization.
Want to see if the numbers work for your team? Check your plan fit.