In today’s tightening job market, to attract and retain the best employees, small businesses need to offer not only competitive pay, but also appealing fringe benefits. Benefits that are tax-free are especially attractive to employees. Let’s take a quick look at some popular options.

Insurance
Businesses can provide their employees with various types of insurance on a tax-free basis. Here are some of the most common:

Health insurance. If you maintain a health care plan for employees, coverage under the plan isn’t taxable to them. Employee contributions are excluded from income if pretax coverage is elected under a cafeteria plan. Otherwise, such amounts are included in their wages, but may be deductible on a limited basis as an itemized deduction.

Disability insurance. Your premium payments aren’t included in employees’ income, nor are your contributions to a trust providing disability benefits. Employees’ premium payments (or other contributions to the plan) generally aren’t deductible by them or excludable from their income. However, they can make pretax contributions to a cafeteria plan for disability benefits, which are excludable from their income.

Long-term care insurance. Your premium payments aren’t taxable to employees. However, long-term care insurance can’t be provided through a cafeteria plan.

Life insurance. Your employees generally can exclude from gross income premiums you pay on up to $50,000 of qualified group term life insurance coverage. Premiums you pay for qualified coverage exceeding $50,000 are taxable to the extent they exceed the employee’s coverage contributions.

Other types of tax-advantaged benefits
Insurance isn’t the only type of tax-free benefit you can provide — but the tax treatment of certain benefits has changed under the Tax Cuts and Jobs Act:

Dependent care assistance. You can provide employees with tax-free dependent care assistance up to $5,000 for 2018 though a dependent care Flexible Spending Account (FSA), also known as a Dependent Care Assistance Program (DCAP).

Adoption assistance. For employees who’re adopting children, you can offer an employee adoption assistance program. Employees can exclude from their taxable income up to $13,810 of adoption benefits in 2018.

Educational assistance. You can help employees on a tax-free basis through educational assistance plans (up to $5,250 per year), job-related educational assistance and qualified scholarships.

Moving expense reimbursement. Before the TCJA, if you reimbursed employees for qualifying job-related moving expenses, the reimbursement could be excluded from the employee’s income. The TCJA suspends this break for 2018 through 2025. However, such reimbursements may still be deductible by your business.

Transportation benefits. Qualified employee transportation fringe benefits, such as parking allowances, mass transit passes and van pooling, are tax-free to recipient employees. However, the TCJA suspends through 2025 the business deduction for providing such benefits. It also suspends the tax-free benefit of up to $20 a month for bicycle commuting.

Varying Tax Treatment
As you can see, the tax treatment of fringe benefits varies.

Insurance is the cornerstone of any not-for-profit’s comprehensive risk management plan. It can’t protect your organization from every contingency, but it’s critical to protecting the people, property, funds and support you depend on.

Must-Have Policies
Many kinds of coverage are available, but it’s unlikely your organization needs all of them. One type you do need is a general liability policy for accidents and injuries suffered on your property by clients, volunteers, suppliers, visitors and anyone other than employees. Your state also likely mandates unemployment insurance as well as workers’ compensation coverage.

Property insurance that covers theft and damage to your buildings, furniture, fixtures, supplies and other physical assets is essential, too. When buying a property insurance policy, make sure it covers the replacement cost of assets, rather than their current market value (which is likely to be much lower).

Optional Coverage
Depending on your not-for-profit’s operations and assets, consider such optional policies as:

  • Automobile,
  • Product liability,
  • Fraud/employee dishonesty,
  • Business interruption,
  • Umbrella coverage, and
  • Directors and officers liability.

Insurance also is available to cover risks associated with special events. Before purchasing a separate policy, however, check whether your not-for-profit’s general liability insurance extends to special events.

Setting Priorities
Because you’re likely to be working with a limited budget, prioritize the risks that pose the greatest threats and discuss with your advisors the kinds — and amounts — of coverage that will mitigate them. But don’t assume this will address your not-for-profit’s exposure. Your objective should be to never actually need the benefits. To that end, put in place internal controls and other risk-avoidance policies.

Establish policies that stipulate proper oversight of accounting functions by executives and board members and provide for the security of physical assets and safety of employees and nonemployees. In addition, your insurance agent can help determine the amount of coverage that’s appropriate given the size and scope of your organization.

Not-for-profit special events can be lucrative from a fundraising standpoint, but they also carry significant risks. Proper insurance coverage can help protect your organization.

Special event, special planning

Risks associated with special events run the gamut from accidents and personal injury to fraud and theft to cancellation due to inclement weather or nonappearance by a featured performer. However, it’s possible to buy designated “special events insurance.”

These policies provide coverage for lawsuits and claims brought by a third party who suffered a loss connected to the event. Coverage may include liquor liability coverage that protects your nonprofit against postevent calamities, such as an auto accident caused by an event guest driving under the influence.

Cost-effective options

There is a drawback: Special events insurance for a single event generally comes with a high price tag. Depending on the type of event and your current coverage, it might be more cost-effective to obtain coverage by extending one of the following types of insurance policies:

Comprehensive/commercial general liability. CGL insurance provides coverage for claims that allege bodily injury or property damage. When necessary, the coverage can be extended to members, volunteers, temporary or leased workers, co-sponsoring organizations, outside sponsors and board members.

Directors and officers liability. D&O insurance covers claims arising from the management or governance of an organization and can include coverage for board members and executives.

Nonowned/hired automobile liability. You may need this coverage if volunteers or staff will use their own vehicles during the event, or if rented or hired cars, such as limousines, will be used.

Fidelity. Fidelity bonds guard against the loss of money or property due to dishonest acts of staff or volunteers.

Weather. Weather insurance provides coverage for losses resulting from weather-related event cancellations and is particularly important for outdoor events.

Nonappearance/cancellation. This insurance protects against losses that result when a featured guest fails to appear.

Check with your insurer

You may already have some of this coverage under your current policies. Check with your insurer to learn if your special event will be covered or if you can pay a one-time additional premium for protection. Contact us for more information on managing risk.