Single Employer Welfare Benefit Program

For many insurance agents, the single employer welfare benefit plan is complicated and confusing at best. The plans are cloudy, and many agents are waiting for the air to be cleared before they begin to introduce this to their clients. Others, still unaware of how these plans actually work, have pushed it to clients.
“The problem is the fact that single employer welfare benefit plans seem to have been misunderstood by many agents,” said Rene Lacape, Member of the San Diego Hispanic Chamber of Commerce. “The legislation regarding tax liability is different for each one. For some, it seems difficult to understand how each benefit differs. Health benefits and unemployment benefits are different. Unfortunately, the key lies in the details and the interpretation of the benefits and the laws, rules and regulations that surround them.”

The Internal Revenue Code (IRC) is perhaps the most complicated document individuals and businesses to navigate through. While it has multiple purposes its purpose in terms of single employer welfare benefit plans surrounds around abuse. Because of the confusion surrounding the plans themselves, it is important to know the effect these plans can have on your clients. A plan that has little guidance by the IRC can be incredibly risky for said clients, in terms of taxes. Because there is little guidance, the benefits differ depending on the interpretation. Choosing a plan that is guided by the IRC allows for minimal interpretation, meaning what may appear to be the right answer may not necessarily always be the right answer.

“In the end, it is all about the guidance,” reminds Rene Lacape. “There are obviously different ways to go about the single employer welfare benefit plans. It really is a client-by-client basis that can determine how you structure the plan and what the tax implications may be. Those who do not completely understand the system can do their clients a great disservice. Rene Lacape also reminds that while this is a business, “Keeping the client in mind is very important. If you do not know the risks involved on their end of the bargain, you probably shouldn’t push the plans until you can explain the risks associated with them.”

The theme of the whole idea behind single employer welfare benefit plans can be complicated. As an agent, it is important for you to understand the risks of each plan and be able to asses what type of risks your client may want, and should be able to take. The decision is up to them in the end. It is up to you to be informed on the situation and understand the effects it can have. Because the amount of risk will go down as the level of IRC guidance goes up, it is important to discuss this with your client. If they are willing to take a large risk, this may not be a big factor. If they are weary, however, giving them this information will help them to make the decision that is right for them.
Jonathan Carlson is a veteran freelance writer covering the life insurance industry.