Why we must all remain vigilant about how our health insurance plans are administered
 

--at least until the day there is universal coverage (in the US) under a system with far less complexity that's far easier to understand.

In the process of getting together my records for the 2007 fiscal year, in order to get tax returns started, I took a look at my wife's last paycheck stub for the year. (Our family receives insurance through my wife's place of employment, and while we shan't mention names, the company's initials are the Child Care Center of NY. :p ). The employer offers a number of health care plans, and also a flexible spending account for non-reimbursed medical expenses, both are deducted from paychecks. But when I looked closely, I noticed that only the flex plan was designated as being funded through pre-tax dollars; the insurance premiums were not.

This, of course, came as a complete surprise to me. Not having had reason to look closely at my wife's pay stubs previously, I had assumed that all of these deductions were made using pre-tax monies--that is to say, taxes are not figured on the pay until all dedicated deductions are subtracted. Ever since this was legislated, almost every company I know has used this method to save employees money on their tax bills. Given the ever increasing contributions that employees are being asked to pay towards their coverage, this can be a pretty substantial tax saving.

I naturally was not happy, and asked my wife to investigate. I eventually wound up contacting her human resources director. He initially said he thought that insurance premiums did not fall into this category. When I assured him they could--I have previous human resources experience myself--he went to do a little investigating and, surprise, yes, these deductions could be made with pre-tax dollars, and he was going to institute that right away.

The point to be made here is don't assume the employer, union, or organization you get your coverage through always has researched all the options to cut the bill; don't assume they are necessarily competent or vigilant in this area. Scrutinize your statements and materials carefully, and speak up if something seems amiss.

I've probably saved the employees there, on average, several hundred dollars on their tax bills for the coming year. I imagine as this info gets disseminated, though, there's going to be some disgruntlement among employees who are going to wonder why a non-employee had to point this out, why the human resource/benefits people did not investigate the possibility, which means employees there have likely lost significant monies over the past several years. (Don't know if this rises to negligence, but I know I was ****** off. And if I were an executive there, I'd be looking for a new head of human resources.)

The bottom line--beyond the ingrained problems of our current health system, there's a lot of waste, lack of savvy, and plain old incompetence out there. Keep a critical eye out.
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glen, can i copy your post to the communtiy forum feedback? i think it is really important and more should know this.

:hug:

LOL..never mind. thank you for spreading the word.

Thanks
 

Glenn,
Many thanks for the heads up and I'm sure many people will benefit from your scrutiny and persistence. I'm fortunate in that my current employer, well for a soon to be very short time, uses pre-tax funds for medical & dental insurance and health accounts too - I've been characterized as "a mother hen with one chick" when it comes to watching these kinds of issues but, bloody 'ell, it's my money.

Thanks again for your post.

alkymst

Pre-Tax
 

Hi Glenn - good catch! And one more thing - if an employee has a choice on paying for a long term disablity plan with pre or post tax dollars - it usually means that the benefits they receive - if ever - will be taxed if paid pre-tax and not-taxable if paid with post tax dollars.... in this case if you ever do need to collect LTD - its more beneficial to pay for this one benefit post tax while working...!

Glen
 

Thanks,I'm sure going to past this on to my children and they to there friends
and so on...Thanks to you as well K...Saving any amout of money
today is so much appreciated..:hug: Sue

Glenn, Thanks!?
 

I put both the ! and the ? to it as I left the 'benefits' world long before this stuff went into effect, and believe me, things were boggling enuf before ...but later..turned mind-boggling...This confirms my instincts that good deals weren't always so...

I do know that every new year, when I get the ostensible 'plan benefits' for the next year...I call and GRILL every key aspect as it relates to both my and my DH's coverage..in detail...While every plan known to man has a caveat of: We reserve the right to change this plan without notice...they usually notify you in a 'hummm' 30 day period or something? Then you find yourself up a creek or the like...I'm not that old yet...[so's I'd like to think?] but this whole thing is scary and scaring me beyond. Then more?
Yes, you must keep an eagle eye out for things, but at the same time, we are little voices to do much about it...
If you want, I can look and find the advocacy sources one should/could check out. The 'Beatles' song 'When I'm 64' is holding more fear for me now...ya know? I shouldn't have to be, but is...so far. Wish it were different - truly - j

I just asked my husband...
 

and he said this was changed about 3 years ago or so for Federal employees. This was done for a long time for military, so the Federal system made it uniform for all other Federal employees. It is an OMB decision.

However, he says there is no law requiring taking the monies out before taxes.
He says it is clearer on the W-2 forms. Otherwise you have to know your tax rate to calculate it all out.

More details here:
http://answers.yahoo.com/question/in...9064557AAAgzKf

Notice you cannot take a deduction if you pay insurance on pretaxed income.

I find this stuff very confusing.... duh?

You're quite right, Mrs. D--
 

--this has been available as a choice for about three years now.

What I find ridiculous is that a company that could take advantage of this does not. It's a nice tax benefit for the employees--migth even make them feel better about the company--and doesn't cost the company anything.

True, one can't then take the medical expenses deduction on one's taxes, but since the 7.5% of total income threshold is not met by many people who are employed in companies big enough to have comprehensive coverge anyway, that's pretty much of a wash. Although, to be fair, I think that 7.5% level is too high and arbitrary, and this would become an issue if it were set more properly lower.

Kmeb's point about long-term disability is important, as that's a situation that involves possible income at a later date, and in that situation there are pro and con implications about paying with pre-tax dollars. But I can't see the downside for almost anyone for paying employer-sponsored insurance premiums with pre-tax monies under current regulations.

great advice...
 

.....and because of outsourcing of HR by so many firms , you are on your own !

Its been a while (30+ yrs) since I haven't been self employed, but I thought that pre-tax benefit payments were a 'no-brainer'.
I used to work in the temporary help industry, & we were always looking for the clients' angles in the benefits packages.
I thought it was a 'given' that most deductions were pre-tax unless otherwise regulated.
When I had employees, my accountant set up their benefits as pre-tax deductions.