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Dennis Sears - AFLAC

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If your district does not offer any employee Dental benefits, other employee-paid Aflac dental plans are available.  Contact Dennis Sears for more information.

 

 

Dennis L. Sears

Aflac Representative

917-714-2969

dennis_sears@us.aflac.com

 Why Aflac?

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 plan.

Saving the School District Money Through Payroll Tax Reductions

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 two.

Aflac Coverages

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 Cancer plans. 

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 medical insurance.

Why Not Wait For Collective Bargaining?

Public employee 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.

Act Now

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_sears@us.aflac.com

Disclaimer

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.