Posted by: brucestein | November 6, 2008

Using the Tax Code

It’s becoming a trend.  As of today’s date, four states now require employers to offer cafeteria plans to their employees (Connecticut, Massachusetts, Missouri, and Rhode Island).1  Nine other states have voluntary cafeteria plan programs, with the state offering some assistance (mostly financial) to businesses that purchase health insurance of their employees (Delaware, Florida, Iowa, Indiana, Kansas, Maryland, Maine, Tennessee, and Washington).2  In addition, at least six other states have considered enacting Section 125 per-tax payroll deduction requirements or options for employers as either stand-alone programs or as part of broader health care reform (Alaska, Colorado, Georgia, Illinois, New Jersey, and New Mexico).3

Even the city of San Francisco has come up with the Commuter Benefits Ordinance, which requires employers to offer a commuter benefits program to their employees effective January 19, 2009.  The goal of the ordinance is to encourage employees to use public transit or van pools to reduce air pollution from private cars.

Historically, the tax system in our country has served two purposes.  Of course, the first is to raise funds to run our government.  The second purpose is to support social directives we believe in.  For example, Americans has long valued the virtues of home ownership, so our tax laws allow for the deduction of mortgage interest and property taxes.  These deductions help many of us afford our homes.

As more state and local entities look for ways to lessen the burden of rising health care costs for employees, these requirements could become more commonplace.  It is an interesting position to be in, having these third party entities exerting influence on employers to adopt plans we administer.  Interesting, but not uncommon.  TASC has encouraging employers to this for more than 30 years.

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1, 2, 3 – States use of “Cafeteria plans” to provide health insurance, National Conference of State Legislatures, October 8, 2008


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