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Sunday, April 10, 2011

Let's talk money! Part 2

What do added benefits really mean to you- financially?

This information is meant to be an estimation-obviously every individual situation is different.

If you are fortunate enough to work for an employer who offers perks in addition to hourly or salary compensation you may be surprised how much these perks and taxes cost your employer and save you.
  •  Medical Insurance- on average the cost of insurance for a business to insure a single person is around $450, for a family $1500 and for a couple $700. (per month)
  • TaxesYour employer matches the medicare (approx.1.5% of your income)  and social security (approx. 6.2%)  - check your stubs
  • Unemployment (state and federal)While you are working, the employer has been paying in a percentage of your income (up to a particular limit; approx. 6.2% up to $7000) to the unemployment compensation fund.The percent the employer pays can depend on the company's history of people collecting, so their future payments can increase when someone collects.The percentage varies depending on state, type of business, and employer history
An employee making 50k a year is actually costing the employer closer to $62,500 - $70,000 



Additional perks = more money for you...


Vacation hours & Sick days- these days off cost your employer your normal pay, but they also cost the employer revenue. If someone fills in for you on these days it is still costing double for that time.

401k-Employers are allowed to make both matching and non-elective 401k contributions. When employers agree to match, they deposit a percentage of elective employee contributions into a 401k account. For instance, they may choose to deposit 50 percent of employee contributions, up to 6 percent of employee income. Or, they may deposit 100 percent of contributions up to 1 percent of income.

Profit sharing- A profit-sharing plan is a type of defined contribution retirement plan that employers may establish for their workers.
The employer may add up to the annual limit to each employee's profit-sharing account in any year the company has a profit to share, though there is no obligation to make a contribution in any year.
The annual limit is stated as a dollar amount and as a percentage of salary, and the one which applies to each employee is the lower of the two alternatives.
Employers get a tax deduction for their contribution. Employees owe no income tax on the contributions or on any of the earnings in their accounts until they withdraw money.
In some cases, employees in the plan may be able to borrow from their accounts to pay for expenses such as buying a home or paying for college.
Profit-sharing plans offer employers certain flexibility. For example, in a year without profits, they don't have to contribute at all. And they can vary the amount of each year's contribution to reflect the company's profitability for that year.
However, each employee in the plan must be treated equally. This means that if an employer contributes 10% of one employee's salary to the plan, the employer must also contribute 10% of the salaries of all other employees in the plan.

(The term vesting refers to whether or not the money that has been set aside for you in a retirement plan is yours to keep if your employment is terminated. "Vested" benefits are those to which you have an absolute right even if you resign or are terminated.
The plan summary should explain about its vesting schedule. In general, money you contribute to the plan (for example, through a 401(k) plan) is vested immediately. If you leave employment you will be able to receive your money back, or "roll" it into an IRA or, perhaps into your new employer's 401(k) plan. Money contributed by your employer will become "vested" after you have worked for your employer for a specified period of time. Some plans provide for no vesting until after a set period of time (generally 5 years -- known as "shelf vesting"), after which you will be 100% vested. Other plans provide for partial vesting on a graduated basis (for example, 20% vested after 2 years, 40% vested after 3 years, etc.).

Additional Information



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