As the end of the year approaches, employers should be proactive in communicating the status of certain tax preferred benefits, as well as encouraging employees to review elections for the new calendar year. I have no doubt that your employees will appreciate your efforts.
Remind employees of where they are with year-to-date 401k plan deferrals. Many employees set an annual deferral amount and then never look at it again until prompted for the new year election. Sending a statement of year-to-date deferrals to participants will prompt them to review their financial goals and perhaps make a change to hit their target, for example, maxing out at the IRS limit.
Flexible Spending Accounts (FSA)
Let’s assume your plan did not adopt the carryover option that was introduced in October of this year and go with the standard plan design of ‘use-it-or-lose-it’. Again this is a benefit that is often overlooked by participants who could easily end the year leaving money on the table. Employers should obtain the balances from their plan administrator and communicate with those participants who have balances and encourage them to utilize the remaining funds. There is still time in the month of December to incur a qualified expense to avoid losing benefit dollars.
Health Savings Accounts (HSA)
While this benefit is not a ‘use-it-or-lose-it’ plan, it does have an IRS annual contribution limit. Participants tend to enroll and set contribution amounts in the beginning of the year and then forget about their account balances. Using year-to-date payroll information you can share the contributions to date and remind your employees of the IRS limit. Proactively sharing their year-to-date information will simply give employees an opportunity to make a change if desired. For example, some participants may want to maximize the tax advantages and increase their contributions to hit the IRS limit before the end of the year.
Total Compensation Statement
I can’t think about year-end benefits activity without promoting the value of a Total Compensation Statement. A Total Compensation Statement gives employees a complete view of all compensation paid; both direct and indirect. Direct compensation is most visible to the employee and includes wages and bonuses/commissions paid. Indirect compensation is often times overlooked by employees and includes employer taxes, employer contributions to insurance plan premiums, and employer contributions to the retirement plan. Providing employees with a statement around year-end is a great way to remind employees of the bigger picture of the value you as the employer provide.
Looking Forward – 2014 Limits
Additionally, December also presents a crucial time to communicate benefit plan limits for the next tax year and encourage employees to review their participation, financial goals and financial needs. Encouraging employees to take a look at these plans will result in greater satisfaction in the employer provided benefit plans because they have an opportunity to make changes to meet their needs in the coming year.
Tax Preferred Plans
|Health Flexible Spending Accounts (FSA)||$2,500|
|Health Savings Accounts (HSA)||$3,300 (individual) / $6,550 (family)|
|Health Savings Accounts (HSA) Catch-up||$1,000 (age 55 and older))|
|401(k), 403 (b), 457(b) Plans||$17,500|
|401(k), 403 (b), 457(b) Plans Catch-up||$5,500 (age 50 and older)|
Related year-end posts:
- Six small business strategies to consider as the year winds down
- Small business year-end financial checklist: 6 must do’s
- 5 Important IT tasks for year-end
- Preparing for a smooth payroll year-end
If you have questions or would like to learn more, please reach out to Genesis HR Solutions at AskUs@genesishrsolutions.com or 800-367-8367.
Genesis HR Solutions is the premier PEO provider for Massachusetts based businesses.