Tremendous numbers of Public Schools
districts all over New York State have agreed to offer their employees
the ability to purchase Aflac's supplemental benefit plans through
payroll deduction. About 80
percent of the school districts on Long Island offer Aflac, as do the
school districts of Genesee and Allegany counties on the other end of New York.
Sullivan, Rockland, and Orange
counties in the Lower Delaware and Hudson valleys, Tioga County in the
Southern Tier, Franklin County on the Canada border and Washington
County on the Vermont border have near 100 percent school district
participation with Aflac.
Sure, Aflac policies are a nice benefit for the
employees; but, they are also a wonderful tool for the districts.
The payroll deduction feature saves school districts payroll tax
dollars. When hundreds of a
district's employees participate in Aflac coverage, tens of thousands of
employer payroll tax dollars are saved.
With enough participation, the payroll tax savings can equal the
cost of hiring needed clerical staff, or another teacher or two, all at
no net added cost to the district.
Aflac has plans that can be designed to cover some or all of
hospital admission deductible costs, which in turn might allow districts
to increase their deductibles and reduce their health care costs.
Aflac policies can be
the vehicle that allows districts to tell their taxpayers they are
saving money even though the employees get an addition to their benefit
package. On the flip side,
the sad truth is every district has employees who get cancer.
Employees who have Aflac's cancer policy will get tens of
thousands of dollars from Aflac, potentially avoiding beloved teachers
in the community suffering financial devastation.
Regardless of the size of your school district,
your employees will pay the same weekly rates for the Aflac individual
payroll deduction plan as do the employees of the largest companies in
New York. Your district employees will have the same payroll rates
as companies like JP Morgan Chase and Verizon as well as large
Government entities like Nassau County, NY on Long Island.
How Pre-Tax Payroll Deductions Help Employees Buy Aflac Plans - and
Might Save School Districts Money
Let's look at the money saving power of pre tax payroll
deductions, which benefits everyone on the payroll including the
administration staff. We all know New York is a high tax state.
As an Aflac plan is a voluntary expense, it follows that the
dollars being spent are those subject to the highest tax bracket of the
individual or his or her family.
It is not unusual for a district employee to be in a 25%
federal tax bracket. Throw
in NY state, social security, and Medicare taxes and it's real easy to
get to a 40% marginal tax rate.
Here is what that should mean.
If someone takes as income the last $1,000 they make, the
government gets $400 and the individual gets $600.
Now if that someone spends the last $1,000 on Aflac coverage via
payroll deduction, they have just reduced their taxable income by
$1,000, which means they pay $400 less in taxes.
The net result is $400 that the individual was going to give to
the government for who knows what, is instead dedicated for his or her
own personal Aflac coverage.
Bottom line, $1,000 of Aflac coverage through pre-tax payroll deduction
only costs the individual $600 out of pocket.
Some Aflac plans do not even cost $400 a year.
Aflac has a hospital plan that pays from $500-$3,000 lump sum in a given
year for one hospital admission per person per plan per year.
Perhaps the district health plan could have a higher deductible
for a person's first annual hospital admission.
That could result in savings to both the district and/or the
employee on the major medical health plan costs - depending on how the
health plan payments are allocated between the district and the
employer. Pretax payroll
deduction reduces the net cost to the employee of the Aflac hospital
Saving the School District Money Through Payroll Tax
As you know the federal payroll tax deduction for employers is 7.65%.
The Medicare portion of this is 1.45% and there is no maximum
salary to which it applies. The
Social Security portion is 6.2% and there is a salary cap.
For 2016, the maximum amount of taxable earnings is $118,500.
If one assumes some amount of district staff earning in excess of
$118,500 perhaps 7% is the net payroll tax deduction per person across
the district. What this should
mean is, if collectively all district employees purchase $100,000 of
Aflac coverage the district would save $7,000 - a not insignificant
amount in the miscellaneous items budget.
A large district with many hundreds if not thousands of employees
could collectively purchase $1,000,000 of Aflac coverage or more.
In that case the payroll tax savings should be in the $70,000
area per about $1,000,000 purchased.
$70,000 could cover all or part of the cost of an employee or
Aflac has many different types of coverage; but, the common
factor, other than for life insurance, is people get paid by the event
not the cost. For example,
under Aflac's accident plan, if someone sees a licensed physician within
72 hours of an accident of any type, even a cut, that person gets $120.
If someone is diagnosed with cancer and he or she has the Premier
cancer plan, he or she receives a minimum $6,000 payment - in addition
to payments for hospitalizations, surgery, and chemo/radiation.
The two most popular Aflac plans are the Accident and
Aflac also offers plans that cover Hospital admissions,
Dental, Disability, and Vision Care.
Term and Whole Life insurance are also offered.
The disability policy includes pregnancy coverage, so women who
elect a short elimination period will receive Aflac salary replacement
benefits while on both sick and FMLA leave.
Aflac supplemental policies pay tax free cash when staff is sick
or hurt so they can deal with the expenses of everyday living.
The cash is paid regardless of other insurance payments.
Even employees who have 100 percent of their medical bills
covered will still receive 100 percent of the payments due them under
their Aflac coverage. These
payments go directly to the individuals, not to the doctors or
hospitals. People can use
them to meet co-pays and deductibles, and also for expenses for
transportation, gas, food, parking or even to replace lost income.
Except in just a very few situations, the only paperwork Aflac
needs to pay claims is a 1- or 2-page claim form and a copy of services
received. The service cost
does not matter, and Aflac does not track how the money is spent.
If individuals suffer an event covered under an Aflac policy,
they always get 100 percent of the payment specified in their policy.
Aflac is the largest supplement benefit company in the
country, and that is all they do.
For that reason, Aflac is able to pay claims to people on average
within four business days of submission.
If individuals sign up for online filing, they will get paid in
one business day under some of our plans.
With Aflac policies, people get the money they need before the credit card
bill comes due. This is very
important in a country where over half the people cannot afford $1,000
of unexpected medical bills, two thirds of bankruptcies are medically
related, and three quarters of those bankruptcies are to people who had
Why Not Wait For Collective Bargaining?
benefits are under the microscope these days.
With average people paying thousands of dollars a year for
medical coverage with large co-pays and deductibles on top of that, many
districts can be apprehensive of having a public discussion about adding
another benefit in the middle of the budget year for the teaching staff.
Delaying the consideration of offering Aflac policies to the employees
until contract negotiations, even though Aflac policies are no cost to the
district, might seem like the correct move.
It moves the discussion into one part of many about a new
contract, so this new benefit does not stick out like a sore thumb.
It makes the administration and school board look as if they are
exercising smart, hardball leadership - perhaps using the Aflac benefit
to achieve a giveback elsewhere.
However, consider the other side.
Suppose a beloved administrator, teacher, or support staff member
gets cancer and is wiped out financially by the many costs that are not
covered by the school district's health insurance plan.
Then, that hardball leadership characterization changes to one of
being cold hearted, unsupportive, and misaligned with the very values we
are supposed to be instilling in our students.
As most of the school staff is well compensated, many will be
able to afford the coverage.
Now that same beloved person is thankful to the district for being
allowed to buy Aflac policies via payroll deduction and avoid financial disaster.
Parents do not bemoan the loss of the outstanding teacher who
could not afford the best treatment or left the district to seek it.
The district can look like a hero to the community when it claims
with the payroll tax savings we achieved by offering Aflac policies, a crossing
guard at suddenly busy intersection was hired or clerical staff
experienced in writing and obtaining grants to fund athletic and arts
program was brought on board.
It's incredibly easy to set up an
Aflac program. Aflac can set
up a section 125 plan for a district for free or it can be included with
the district's existing section 125 plans.
It only takes about a 15-minute phone call with an Aflac HQ
representative to organize the plan.
It is possible to have a special account manager for the district
set up at Aflac HQ to handle invoicing matters.
The Aflac online billing feature allows staff changes affecting
the invoice to be updated instantly.
Aflac bills in arrears to allow staff changes in a month to be
updated before the bill is paid and not after.
Dennis Sears is the SBA representative
for Aflac. Dennis is the son
of a teacher and the husband of a teacher.
He has lived on Long Island since graduation from college but his
family roots in the Utica area go back to before the civil war.
He can be reached at 917-714-2969 or by email
Dennis L. Sears is not a licensed tax professional and no
representation to that effect is being made. You may not rely on
any statements made here regarding taxes. Always consult your
licensed tax professional on all tax issues.