What is Sscooping and How Can I Look Out For It?
Scooping is something you would never even think to ask? You most likely charge employees a portion of their beneﬁt costs and hopefully are using a Section 125 Plan (the one you have ﬁled and one you submit 5500’s for (that is another story)). Under the 125 plan, those contributions are deductible by the employee for Federal and State Income tax. Under Section 125 you as the company would also save money because your F.I.C.A. matching contribution is based on a lower salary.
Here’s a simple example:
Your employee makes $50,000 and contributes $10,000 for health insurance (hopefully in real life the employee’s contribution – even for family coverage, is much less, but for this example let’s stick with easy numbers – the point will be the same).
So, your employee will pay Federal and State Tax on $40,000 and Social Tax on $40,000, not $50,000. From the company’s point of view, you saved 7.65% on the $40,000 instead of the $50,000 also. Or did you???
Scooping is when the PEO charges you the 7.65% on the $50,000 – pays the Government the tax on the $40,000 and keeps the rest! Really? Yes. Who would even think to ask that question – and by the way that 7.65% of the total employee contributions for all your beneﬁt plans really adds up!
That is only one example of why you need a professional PEO broker to guide and educate you on what you need to know about each of these PEOs – whether it is their fees, modules, service model, history of renewals, etc. We compare all of it and present it all in one easy place for you to review. Start to compare PEOs, because they are all not created equal. That is one of the reasons some many smart HR and Finance professionals use SBE479.org – ThePEOpeople.com