Flexible Benefit Plan
What is a Flexible Benefit Plan?
While some companies prefer to offer predetermined benefits for employees, employers who offer flexible benefit plans allow their employees to pick and choose the benefits they want or need. Some types of benefits that may be available in the package offered by the employer include retirement plan benefits, health insurance, life insurance, and health savings accounts (HSA's). If you are looking for a flexible benefits plan, it is important to understand and review all options available to you.
Flex Benefit Allowance
The flex benefit allowance is provided by the employer in a form chosen and structured by such employer. It acts as a form of reimbursement and will subsidize part or all of the premiums or costs of the benefits provided under the flexible benefits plan. The employee will typically have an option in choosing among different forms of flex benefit allowance offered by the employer or forgoing it which may result in a larger paycheck.
What are Cafeteria Health Insurance Plans
Flexible benefit plans are sometimes referred to as cafeteria plans. When the plans are focused on choosing among the types of health insurance from a selection of options, then they are a type of flexible benefits plan known as a cafeteria health insurance plan. Again, with such plans, the employer has a range of options in a package that it offers to employees.
The employees can then select the health benefits that are suitable for their needs and their own personal situation. Also, if you are not in need of a health benefit plan through your employer, if, for example, you are covered by another person's health insurance plan, then you can forgo this benefit and save any premium contributions you may be responsible for contributing to obtain a health plan through your employer. You may also want to consider plans that offer fewer benefits, but that offer benefits not provided by the plan in which you are already covered under by a spouse, parent, government plan, or family member.
Three Types of Flexible Benefit Plans
Flexible spending accounts may be offered in three types of structures. A premium-only type plan is one in which the employee will contribute the premium, or have it deducted for their paycheck, for the selected flexible benefits. There are also health savings plans and dependent savings plans. Through both of these latter options, the employee is able to set aside a certain amount of pre-tax income to cover allowable health expenses for a medical flexible spending account (or "FSA"), or certain dependent expenses for a dependent flexible spending account. The employer may also contribute towards the costs of some of these as well. It is worth noting that medical flexible spending accounts can often be used to cover other health-related expenses that may not be covered by your health plan.
Flexible Benefit Plans Pros and Cons
Flexible benefit plans are a great option to consider because not everyone will have the same needs, and these plans give people more options to choose from. However, flexible benefit plans may not be the right fit for across the board, so it's important to weigh the pros and cons.
Flexible Benefit Plan Pros
The pros of flexible benefit plans are as follows:
- Flexibility - Employees Can Choose the Benefits They Want and Need
- Saving Money Through Pre-tax Contributions - Contributions towards premiums or other benefits included in such plans are typically deducted from the employee's paycheck with income before taxes
- Saving Money Through Only Obtaining the Benefits You (as an employee) Want or Need, and Not Those That You Do Not
Flexible Benefit Plan Cons
Some potential cons of flexible benefit plans include the following.
- The Terms Can Make Choosing The Right Plan Tricky
- Some Flexible Plans Do Not Necessarily Offer the Best Benefits
- If You Have an Allowance That You Do Not Use that Year, You May Lose that Money