Defined Benefit Plan For Small Business

Defined Benefit Plan For Small Business-60
Utah’s health insurance exchange offers a desirable benefit for employees working for employers who provide DC insurance.Different members of the household can combine their employers’ contributions into a single pool of funds.

Utah’s health insurance exchange offers a desirable benefit for employees working for employers who provide DC insurance.Different members of the household can combine their employers’ contributions into a single pool of funds.

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With defined contribution health insurance, an employer could contribute pre-tax funds toward employees’ insurance.

(This amount should remain deductible to the employer.) Employees could then purchase their own insurance policies.

Since employer-sponsored insurance (ESI) became common in the 1940s, DB plans have dominated the market.

With a DB plan, the employer offers employees an insurance policy (or several policies) with a specific range of healthcare benefits.

DC health insurance could benefit employers significantly.

DC can free employers from a heavy load of administrative time.There is little reason to believe that the small-business owner can make better insurance choices for his employees than the employees can make for themselves.Few small businesses have human resources departments.Wartime and postwar price controls made it unlawful to give raises to employees.Employers discovered that they could circumvent these controls by providing insurance rather than additional money.In contrast, with a DC plan, the employer provides the employee with a fixed quantity of money; the employee uses these funds to purchase a health insurance policy of his or her own choice.World War II-era policies led to today’s DB dominance.Employers would no longer have to choose their employees’ insurance plans.Nor would the employer have to manage the plan or at least play a large role in its management.Tax and insurance regulations should allow employers to create defined contribution plans for health insurance.This would make health insurance simple for employers and would give employees a broad range of choices.

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