Change a pay rate based on different benefit selection

jcm

Hello,

We have a home health program that pays its field staff by the visit. We would like to begin offering benefits (medical, dental, paid time off, etc.) but aren't sure how to go about it. We are considering letting emps take a pre-determined, lower per-visit rate for each benefit they select (e.g., $40/visit with no benefits, $35/visit with 10 PTO, $25/visit with PTO + med. insurance, etc.) As long as we make sure we are in compliance with our medical plans re: hours worked, can we do this without a Cafeteria 125 plan, or would the 125 plan be required?

System

Section 125 comes into play if you take deductions for benefits on a pre-tax basis. If you are not doing that, then you shouldn't have any impact regarding Section 125. What you're proposing seems simple at first, but I believe could be complex in how you manage it. Not sure how you would actuarially determine the different in salary for each component of the benefit plan they select. Although, I guess what you are sort of recommending in reverse is a waiver type program - where if someone doesn't elect any benefits, they get additional money in their pay. Otherwise, each benefit has an employee contribution amount that would reduce the pay. These programs would typically be in a cafeteria plan - taking you back to a Section 125 plan.

Sorry, I'm not much help, but I think you'd probably need more expert and financial advice to construct this plan. Good luck!