The Problem with Paying Health Insurance by a Salary Bonus From BenefitsCafe.com

Some employers prefer giving their employees more money and letting them purchase their own insurance. Unfortunately, this strategy costs employer and employee a lot of money. The reason: taxes. When employees buy insurance on their own, they pay with after-tax dollars. It makes much more sense to set up a company group health insurance plan than pay a salary bonus so employees can buy insurance. Here’s an example to show you how this is true:

Employee Bonus to Pay Health Ins.	$131.00
Pays: Federal Income Tax @ 13%	$17.03
State Income Tax @ 2%	$2.62
State Disability Ins. @ 0.5%	$0.66
Social Security @ 6.2%	$8.12
Medicare @ 1.45%	$1.90
Total Extra Paid	$30.33
Net Pay to Employee	$100.67

Employer Bonus to Pay Health Ins.	$131.00
Pays: Worker’s Comp. @ 2.0%	$2.62
SUI @ 2.5%	$3.28
State ETT & FUTA @ 0.2%	$0.26
Social Security @ 6.2%	$8.12
Medicare @ 1.45%	$1.90
Total Extra Paid	$16.18
Net Cost to Employer	$147.18


Scenario 2: Employer Pays for Health Insurance

Employer: Payment for Health Insurance	$100.00
Pays: Worker’s Comp. @ 2.0%	$ 0
SUI @ 2.5%	$ 0
State ETT & FUTA @ 0.2%	$ 0
Social Security @ 6.2%	$ 0
Medicare @ 1.45%	$ 0
Total Extra Paid	$ 0
Net Benefit to the Employee: Full Health Insurance Plan

Employee: Cost of Health Insurance	$100.00
Pays: Federal Income Tax @ 13%	$ 0
State Income Tax @ 2%	$ 0
State Disability Ins. @ 0.5%	$ 0
Social Security @ 6.2%	$ 0
Medicare @ 1.45%	$ 0
Total Extra Paid	$ 0
Net Benefit to the Employee: Full Health Insurance Plan

Get a California Group Health Insurance Quote.