Small businesses make up the vast majority of businesses in the United States.  The number of small businesses is increasing rapidly as big corporations downsize and as more and more people realize that they can thrive as entrepreneurs.
 
Small business owners have to provide benefits that were formerly provided by the large corporation that they served.  This includes expenses that will occur largely after retirement: like long term care, medical expenses and life insurance.
 
Section 419(e) of the Internal Revenue Code enables the creation of a Single Employer Welfare Plan.  This type of plan can utilize tax deductible business contributions to fund post retirement health care and life insurance benefits.
 
The entities that can establish this type of plan include C and S Corporations, Partnerships and Limited Liability Companies.   
The benefits can be provided for both employees and their dependents.  There are numerous design options, so the specific needs of each sponsoring business can be addressed.  The funds are held in trust for the exclusive benefit of the employees. Therefore the funds are beyond the reach of business creditors.  These plans allow for flexibility in contributions, there is no annual minimum, so in lean years there is no required contribution, and in good years substantial contributions can be made.
 
Among the benefits that can be provided under a Welfare Benefit Plan are:

•     medical and hospitalization costs, including insurance premiums, co-pays, deductibles and noninsured medical expenses,
•     prescription and over the counter drugs
•     long term care, home health care and nursing home expenses
•     death benefits including individual and coverage for dependents.

 
Forward thinking small businesses should evaluate the Welfare Benefit option.