While flexible benefits, or cafeteria plans, have been around since the early 1970s, they have been available almost exclusively at companies with thousands of employees. But in the past year or so, the plans have been installed more frequently at smaller companies, thanks in part to software packages that cut the ongoing expense of maintaining the benefits programs, and to more interest in working with growing businesses on the part of consulting firms and insurance companies.
BGS Systems Inc., in Waltham, Mass., will be paying a total of $240,000 per year for the cafeteria plan it adopted last January, says Edward Hellenbeck III, second vice-president at Unionmutual of Portland, Maine, which drew up BGS's program. That fee covers a variety of insurance options now available to employees, including medical and dental coverage, disability insurance, and life insurance. For Ted Kelley, the $9.1-million specialty software company's human resources director, the cafeteria plan is clearly a strong recruitment tool for BGS: "We're trying to compete against the Wangs, the DECs, and the Primes -- companies that want the same kind of worker we have," he says.
Given the likelihood of major changes in the tax laws this year, the future of these benefit plans is uncertain. Yet one proposal, backed by the Reagan Administration, might actually increase interest in flexible benefits. Under this scenario, all fringe benefits would be taxable to the employee, whether or not they are in a flexible program. As a result, employees would tend to choose only those items they needed most. A single person with no children, for instance, might take little or no life insurance.
If the "major driving force." behind flexible benefits is to give employees tax-free fringe benefits, says Mike Davis, a vice-president in the Boston office of The Wyatt Co., then perhaps companies should wait and see how the tax-law debate turns out. But most companies, he adds, are instituting flexible benefits to stay competitive. For them, he says, there is no reason to wait.