What is an employer sponsored plan?
An employer sponsored plan is an option included in a benefits package that provides a specific service to employees at either no cost or a significantly reduced cost. Employees who choose to enroll in the program offered receive discounted services, whether the plan is a 401K retirement plan or health savings accounts. There are several programs that fall under the employer sponsored category, and employers receive tax breaks for providing them to employees. The programs are also used to attract and retain qualified talent for the company. Employees benefit from free or low costs services, particularly when employers provide matching contributions and health coverage.
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When do I need to be aware of an employer sponsored plan?
There are numerous services that can be offered through a sponsored plan, including different retirement savings plans with tax advantages and group health care options. Enrolling in an employer sponsored plan gives employees the advantage of better benefits at a lower cost, while employers receive tax savings and more interest from job seekers.
What is important to know about employer sponsored plans?
For the employee, there is income potential with an employer sponsored retirement plan, but healthcare services become more affordable with fewer restrictions on eligibility. However, employer sponsored plans are completely controlled by the employers, from the selection of benefits and plan options. There are some other important items you should know about employee sponsored plans:
- Coverage under an employer sponsored programs is dependent upon employment, with coverage terminated upon leaving the company.
- These plans have no individual underwriting, as they are guaranteed-issue for eligible employees.
- Employers have a minimum contribution amount for each plan, but some of the premium costs can be shared by the employees.
- Increases in health insurance costs and the passing of the Affordable Care Act have jeopardized employer sponsored plans, with some companies looking at reimbursing individual health insurance premiums as an alternative.
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