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Navigating through your employer’s benefits can be confusing at times, especially when you’re new on the job. Your employer may offer commonly known benefits like health insurance and an employer-sponsored retirement plan. However, did you know that there are other types of employee benefits that your employer could possibly offer? If you aren’t sure how to set up your employer’s benefits or become eligible for the perks, reach out to your Human Resources department.
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At MYRA Wealth, it’s our goal to help our clients become more financially literate and independent. That’s why we wanted to let you know that you could be eligible for these additional ten employee benefits.
This article discusses employee benefits of meals and lodging, prepaid legal services, child and dependent services, athletic facilities, educational assistance, no additional cost service, de minimis fringe benefits, qualified transportation fringe benefits, dental insurance, and VEBA.
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Meals and Lodging
Meals and lodging benefits can be made available to those employees who travel for their job. In this case, employers can choose to cover the meal and lodging expenses you accrue. They can pay these expenses ahead of time for you, give you a corporate credit card to charge or reimburse you for the meals and lodging expenses.
Employers can benefit from this because the value of the meals and lodging can be deducted from income. However, the following criteria must be met:
- The meals are furnished by the employer, on the employer’s premises, and for the employer’s convenience
- The employee is required to accept the lodging as a condition of employment
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Prepaid Legal Services
This kind of fringe benefit is one that makes legal services available to employees when they need them. The employer pays for the cost of the services, and in turn, the expenses of the plan are deductible for the employer. However, the benefits are included in the gross income for the employees.
This type of benefit is typically available only for a large employer. The plan can be advantageous because it can provide legal help to low-income and middle-income families that cannot afford legal counsel otherwise.
Unfortunately, many employees opt out of prepaid legal services because they are difficult to understand. However, with a few key points on what they include and don’t include, you’ll be able to determine if this service will benefit you.
Legal assistance can include any of the following:
- Bankruptcy assistance
- Divorce and child custody legal assistance
- Preparation of estate planning documents such as wills
- Adoption assistance
- General legal counsel
Prepaid legal services usually exclude the following:
- IRS audits
- Class action suits
- Actions against the employees
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Child and Dependent Services
For child and dependent care services, some employers will offer the opportunity to contribute to accounts that are specifically used for childcare services. These accounts are called dependent care flexible spending accounts (FSAs).
The employee will not have to include the gross income value of the services paid for by the employer. Additionally, these dependent care FSAs can give you tax benefits for contributing directly from your paycheck. As of 2019, there is a limit of $5,000 for those filing single or head of household as well as those couples who are married filing jointly. The limit for married individuals who file separately is $2,500 for 2019.
Some employers will have health and fitness facilities on their premises. This benefit is excluded from the income of the employee. Sometimes an employer will ask for a small membership fee that is deducted right from your paycheck. Other times, it will be a completely free service to use. Many times the benefit can be provided to both the employee and their dependents, too.
Arguably one of the best employer benefits is educational or tuition assistance. This means that your employer will help you with costs accrued that are related to your job description. For instance, many employees may opt to pursue an undergraduate or graduate degree.
Be sure to receive approval for your degree before you get started. Employers will have reimbursement procedures that you need to follow. They may have differing amounts they will cover between tuition expenses and fee expenses.
Educational assistance at the undergraduate and graduate levels are also excluded from gross income. However, there is an annual ceiling of $5,250. After that, you may have to pay taxes on the assistance.
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No Additional Cost Service
Some employers will work with external providers to secure discounts for their employees as an additional perk. These discounts could be anything from cheaper movie tickets, monthly credits on cable and internet bills, cheaper cars, or even discounts on the products or services your employer offers themselves.
Services that result in no additional cost can be excluded from your gross income if the following conditions are met:
- The employee receives services, as opposed to property that is offered by the employer to customers in the course of business
- The employer does not incur substantial additional cost in providing the services to the employee
- The services are offered to customers in the ordinary course of business where the employee works
Employee discounts can also be excluded from your gross income under the following conditions:
- The exclusion is not available for real property or for personal property
- The property or services have to be in the same line of business as the work of the employee
- In the case of property, the exclusion is limited to the gross profit of the price to customers
- In the case of services, the exclusion is limited to 20% of the regular customer price
Employee discounts and services cannot be discriminatory of highly compensated employees. If they are, these key employees will be denied exclusion treatment.
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De minimis Fringe Benefits
De minimis fringe benefits are small benefits that an employer offers to their employees, such as property or services. Because they are worth such a small value, it would be impractical to account for them. As a result, they can be excluded from the employee’s gross income.
Things that can be considered a de minimis fringe benefit are:
- Fruit baskets
- Break room snacks and coffee
- Birthday gifts
- Company memorabilia
- Holiday parties in the office
- Occasional sporting event tickets
- Overtime meals and transportation
- Using the copy machine for personal use
Qualified Transportation Fringe benefits
Through this benefit, employers encourage their employees to use public transportation by providing reimbursement. The benefit is nontaxable and can include transportation for the commuter highway between the employee's residence and the place of employment, as well as parking fee reimbursement for those who drive to work.
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Dental insurance is usually an additional health insurance benefit that can be elected by the employee during open enrollment or when just starting their job. Employers will purchase this as group coverage.
Many employers will contribute towards your costs, leaving you with a smaller premium deduction each paycheck. The premiums paid by the employer are tax deductible, but the benefits that the employees receive are tax-free.
Voluntary Employees Beneficiary Association (VEBA)
VEBA is a type of welfare benefit plan that employers can make deposits into for future employee benefits. A trust or corporation is set up by the employer or through collective bargaining to hold the funds.
The income from VEBA is exempted from a regular income tax if the VEBA meets certain requirements. A VEBA is able to permit the employer’s tax deduction for welfare benefits to be accelerated. The annual contributions that an employer makes to a VEBA fund is usually determined by an actuary. The amount can be paid annually or in installments, and the payments are fully deductible to the employer in the year when the contribution is made.
Certain risks are reduced because a VEBA is an irrevocable trust exclusively for the employees benefit, and thus, it protects the funds from reverting back to the employer. However, a VEBA can be complex and costly to install and administer.
With a VEBA life insurance and sickness/accident benefits can be provided before and after retirement. Other benefits like vacation, severance, unemployment, disaster and legal services are also part of the benefits that VEBA can provide. However, VEBA is unable to provide benefits for savings, retirement, coverage of commuting expenses, accident and homeowners insurance, and other items unrelated to the maintenance of the employees earning power.
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As a new or existing employee, make sure that you know all of the benefits that your employer offers you. It’s important to understand what they cover and how they work. Sometimes, you may have to reach out to your Human Resources department to find out how to sign up or become eligible. Ask HR for an “Employee Benefits Handbook (or Guide)”. But, many of these benefits can add value to your life and your financial plans through additional experiences, discounted products and services, reimbursements and even freebies.