What Are 419(e) Welfare Benefit Plans?

A 419(e) welfare benefit plan is a type of employer-sponsored employee welfare benefit plan. 419(e) welfare benefit plans qualify under paragraph (e) of Section 419 of the Internal Revenue Code. They provide a range of benefits to employees, such as life, health, disability, long-term care, and po🐻st-retirement med🌊ical.

These plans can be either target contribution or target benefit in design and are intended to provide additional financial stability for employees during their retirement years. The downside of 419(e) 澳洲幸运5官方开奖结果体彩网:welfare benefit plans is that they are complex and typically require an actuary to setuꩲp and implement.

How 419(e) Welfare Benefit Plans Work

A 419(e) plan allows employers to select the benefits they offer their employees. Employers can add new benefits to the 𓆉plan which can be used to supplement existing benefits. For example, 🎶if an employer provides a benefit plan that includes group term life insurance, they could add disability insurance to offer a range of personal insurance options.

The same company pays for all of the benefits of the plan and does not pool benefits among employees of other companies. Employers make irr🐻evocable cash contributions on behalf of their employees on a periodi🤪c basis.

A third-party administrator arranges actuarial certification of funding and benefits and approves the plan's administration. The Internal Revenue Service (IRS) issued revised guidance in October 2007 that excluded some benefits for plans funded with permanent insurance. Thဣe 419(e) benefit plan can also keep contributions made for key employees separate from those of rank-and-file employees.

Advantages of a 419(e) Welfare Benefit Plan

• Employee Benefit: Employees receive piece-of-mind knowing that their family is protected if they encounter an untimely death. In retirement, they have many of their medical expenses covered. For example, if their plan includes post-retirement health care, they are unlikely to receive any large medical bills.
• Company Benefits: Companies may offer a 419(e) benefit plan with enticing benefits to retain valued employees and attract talented personnel; this helps to reduce recruitment and training costs. Provided employers adhere to the plan's rules, contribution payments are tax-deductible which makes them more affordable to small and mid-sized companies.
• Supplemental Compensation: Other compensation plans, such as retirement plans, often have contribution restrictions. Offering a 419(e) plan to valued personnel allows a company to provide additional benefits as part of their total compensation package.