Employee Benefits
MEDICAL
Health insurance can be included in a dealer’s benefit package as a means of enticing quality employees. It provides for insurance against loss from illness or injury. Health insurance offers coverage for medicine, doctor or emergency room visits, hospital stays and other medical expenses. Policies differ in what they cover, the size of the deductible and/or co-payment, limits of coverage and the options for treatment available to the policyholder. Health insurance can either reimburse the insured for expenses incurred from illness or injury or pay the care provider directly. There are a number of companies providing private health insurance, including Blue Cross, United Healthcare and Aetna.
LIFE
Life insurance is coverage which guarantees a specific sum of money to a designated beneficiary upon the death of the insured. It can be used by dealer principals in a variety of business and personal settings. Term and permanent life products may be offered to a dealer’s employee in a benefits package. Such insurance provides a level of security to the family of employees affected by the death of a wage-earner. Credit life insurance covers the loan obligations of the dealer’s customer. And, life insurance can be used in many business-succession or estate-planning arrangements using instruments such as key-man insurance, buy-sell agreements, or life insurance trusts.
DENTAL
Dental insurance is a type of health insurance that pays a portion of the costs associated with dental care. A dealer may include dental insurance within a package of employee benefits. There are several different types of individual, family, or group dental insurance plans and those are grouped into three primary categories: (1) Indemnity, which allows an employee to see any dentist they want (as long as the dentist accepts the dental insurance); (2) Preferred Provide Network dental plans (PPO); and (3) Dental Health Managed Organizations (DHMO) in which the employee is assigned to an in-network dentist and/or in-network dental office and use the dental benefits in that network.
VISION
Vision insurance is an employee benefit that, under a group contract, can help to cover the cost of eye exams, contact lenses and glasses. Some vision plans will also pay for corrective procedures such as laser eye surgery. Most plans will cover one pair of glasses or contacts a year. Usually the plans will only cover the costs of standard lenses, not specialty lenses. The dealer’s employee-provided health insurance may sometimes cover the cost of an eye exam and offer a discount on glasses. Dealers can generally deduct 100% of the vision/dental/health insurance premiums they pay on qualifying group health plans. Providing vision/dental/health insurance coverage to employees as part of a total compensation package may also result in reduced payroll taxes for dealers.
DISABILITY
Disability Insurance, sometimes called disability income insurance, protects the earned income of the dealership’s employee in the event of a disability that prevents the performance of his or her job. An example of such disabilities includes psychological disorders or injury that may prevent the employee from focusing or maintaining composure. Disabilities may also include illness or accident that causes physical impairment or incapacity to work. It encompasses paid sick leave, short-term disability benefits, and long-term disability benefits. Depending on the plan, the coverage can be purchased using before-tax or after-tax dollars.
SECTION 125
Dealer-principals may offer flexible employee-benefits plans, sometimes called Cafeteria Plans or IRS 125 Plans. This employee benefits program is available under Section 125 of the Internal Revenue Code. It allows employees to select from a pool of choices, some or all of which may be tax-advantaged, such as life and health insurance, vacations, retirement plans and child care. Although a common core of benefits may be required, the employee can, from a total amount promised by the dealer, determine how his or her remaining benefit dollars are to be allocated for each type of benefit. Sometimes employee contributions may be made for additional coverage.
FLEXIBLE SPENDING ALLOWANCE
Flexible Spending Accounts, or FSAs, are offered and administered by the dealer-principal. FSAs provide a way for employees to set aside, out of their paycheck, pretax dollars to pay for the employee’s share of insurance premiums or medical expenses not covered by the dealership’s health plan. The dealer may also make contributions to an FSA. Typically, benefits or cash must be used within the given benefit year or the employee loses the money. Flexible spending accounts can also be provided to cover childcare expenses, but those accounts must be established separately from medical FSAs.