Advantages and Disadvantages of Contributory and Non-Contributory Group Plans

Are Health Insurance Premiums Tax Deductible In 2011 - Advantages and Disadvantages of Contributory and Non-Contributory Group Plans

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As we mentioned in former article, many corporations offer competing packages, and that's even a strategy in hiring and retaining employees. These competing packages contain group insurance to plans that provide individual seclusion accounts or former registered pension plans, etc. In this article, we will discuss the benefit and disadvantage of contributory and non-contributory in group insurance plan.

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Are Health Insurance Premiums Tax Deductible In 2011

I. Contributory Plan

Under this type of plan, employees conduce a portion of group insurance premium.

1. Advantages of contribution plan includes
a) premium contributed by employees expanding over all premium resulting in more extensive group insurance plan.
b) the employees have their choices of choosing better group plans
c) Eliminate some inordinate claims, which creates high contact ratios causing increase of premium when group plan come to be renewed.
d) In Canada, if the employees pay health care premiums and the premium exceeds 3% of their dutible revenue for the year, 17% of the number in excess of the 3% will be returned as a tax credit.

2. Disadvantage
Employees must pay portion of their share of premium out dutible income.

Ii. Non contributory plan

Under this type of plan, no contributions are required of the employees, all group insurance premium are paid by employer.

1. Advantages
a) Employees do not conduce to the plan cost therefore, lower paid employees can participate in the same level of care as the more very paid employees.
b) Most of manager paid all group insurance has lower administration costs and easy to setup and maintain.
c) Premiums are tax deductible for the manager and only the life insurance premiums are a dutible benefit to the employee.
d) All employees are automatically covered.

2. Disadvantages
a) Plan ordinarily not as extensive as contributory plan
b) Benefits received as payments under short term and long term disability group plan are dutible to the employee.
c) premium paid on behalf of employees may be added to the dutible income.

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