As healthcare prices continue to increase, employers need to find ways to lower these costs. A Medical Expense Reimbursement Plan (MERP) is a strategic tool companies use to help employees manage their out-of-pocket healthcare costs. MERP products are flexible and tax-advantaged, well-suited to small and large businesses and beneficial to both parties.
Employers can enjoy significant tax advantages when they use a MERP to reduce healthcare benefits costs.
Tax-specific benefits include:
- Deductible reimbursements: Employers can deduct the amount they reimburse employees as a business expense under Section 162 of the IRS.
- Tax reduction: By deducting these reimbursements, employers lower their taxable income, which can significantly reduce overall tax liability.
- Payroll exemptions: Medical expense reimbursements provided through a MERP are not subject to Social Security or unemployment taxes.
- Lower contributions: Since reimbursements are excluded from payroll taxes, employers can reduce the amount they pay in payroll tax contributions.
Whether integrated with insurance or offered as a stand-alone benefit, MERP products can be a powerful tool in a comprehensive benefits package.
They create a win-win scenario for employers and employees regarding tax savings and control over healthcare costs. A MERP can leverage these tax benefits and implement cost-reduction strategies.
Download the Guide to see learn more about the tax advantages of a MERP.
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