Employer contributions to bona fide trusts such as 401(k)s, section 125 cafeteria plans, or health savings accounts (HSA)s can be some of your best options to help you meet fringe benefit requirements when working on government projects. While many employers might think increasing health benefits or paying more to employees in cash are the best way to meet these requirements, contributing to a bona fide trust could offer your business the most value.
Benefits to employers
Bona fide trusts are exempt from annualization and provide large company tax savings. Unlike cash payments, contributions to bona fide trusts are exempt from social security and workers’ compensation, as well as federal and state unemployment taxes. For an employee that works 40 hours a week with a payrate of $15 per hour, many employers end up paying an excess of $3 per hour when attempting to meet prevailing wage requirements — this can be avoided by paying the fringe requirement through a bona fide trust contribution. Employees can also get tax advantages by receiving payments through these trusts.
Benefits to employees
Offering employer contributions to a bona fide trust in your benefits package gives each employee a configurable mix of retirement, tax-reduced spending, and available cash as they need it. A lack of individual savings combined with the deteriorating social security program in the U.S. poses significant future economic problems for the average worker. Tax-exempt savings programs and secure retirement savings can help employees secure their future, while helping employers retain top-skilled construction professionals.
Favorable options to meet fringe requirements
Understanding benefit options for your business and your employees can be difficult. Fortunately, we’re here to help our clients navigate these complexities to ensure employee benefits are set up optimally.
Contact an eBacon representative today to find out how we can help set up your employee benefits more favorably for your business.
The material presented here is educational in nature and is not intended to be, nor should be relied upon, as legal or financial advice. Please consult with an attorney or financial professional for advice.