Cypress Firm Sells ‘Family-Friendly’ Benefits

Voucher administers tax-advantaged programs for companies, helping employees with day care, elder care.

Even the White House has taken an interest in the services of the Voucher Corp., a Cypress-based company that administers tax-advantaged programs for other private companies.

Voucher officials were invited to 1600 Pennsylvania Ave. last summer to talk about an experimental school voucher program the company is conducting in the Atlanta area.

It is the company’s first program using school vouchers. More often, Voucher administers child care, ill child care and elder care programs.

Recently, Voucher signed Ralston Purina, which employs more than 56,000 people, and the Hyatt Corp., which has 38,000 employees, to participate. Other clients include British Airways, J.C. Penney, Kids ‘R’ Us, MCA/Universal, PacifiCare Health Systems and Toyota Motor Sales USA Inc.

The company’s clients are making available its services to 1.1 million people, said Denise Lilley, the company’s 32-year-old chief executive.

Voucher opened its doors in the United States in 1988 and is a division of a French company Accor. Besides the Cypress headquarters, the company has sales offices in Atlanta, Dallas, Palatine, Ill., and Independence, Ohio. Lilley said the company will be profitable in 1992 with an estimated $3 million in sales.

The concept is simple. Employers pay Voucher to administer various employee benefit programs that involve pretax deductions. For example, employees may purchase up to $5,000 in child-care vouchers each year and use them, like money, to pay for day care. Employees can save up to $1,700 in taxes and employers cut costs because no matching Social Security (FICA) taxes have to be set aside.

More than 12,000 day-care centers in the country accept the vouchers, Lilley said.

Lilley’s company charges the employer 4% to 7% of the face value of the vouchers, depending on the size of the company. So the employer saves the difference between 7%, for example, and the 7.65% the company would have to pay in Social Security taxes.

While the savings may not be substantial, the program pays for itself and creates goodwill among employees.

The same system applies for elder care. To be eligible, an employee caring for an elderly relative, according to federal guidelines, must be responsible for the relative at least eight hours a day and pay at least half the person’s financial support.

PacifiCare Health Systems, also based in Cypress, has used Voucher’s program since February, 1990. Pat Erickson, employee services manager for PacifiCare, said there were some initial paperwork changes that took about a year to work out.

But, now, 12% of the company’s 1,800 employees are using vouchers, combined with a $15-per-week child care subsidy the company offers to employees making less than $60,000 a year. “Not only do the employees have an opportunity to save on taxes, which hopefully allows them to buy better quality health care, but PacifiCare also saves in taxes,� Erickson said. “It has worked out very well.�

In Orange County, according to a survey by Pepperdine University students, child care costs from $3,000 to $7,000 a year, depending on the type of care and age of the child.

Voucher also issues vouchers that can be used to buy commuting passes--on a train or bus--under a federal subsidy program. Employers can offer their employees up to $21 a month in transit vouchers. They are accepted by the Orange County Transportation Authority, Amtrak and 17 other bus and rail operators in the greater Los Angeles area.

The company also operates a referral service for day care for mildly ill children.

The programs seem like no-lose ventures, but Lilley said it can take her sales people years to persuade a company to use them. She said some companies already buy similar services through insurance companies, although she said that those programs usually require the employee to spend money first and be reimbursed, which is difficult for lower-income workers. Businesses that design their own pretax benefit programs also reduce Voucher’s number of potential customers.

Some companies don’t think enough of their employees would use the voucher system. Still others, “believe it or not, are apathetic about child care,� Lilley said.

There are disadvantages, however, to all pretax benefit programs: Employees must estimate their dependent care expenses for a full year, which can be difficult. They must stay with the program for at least a year once they sign up, according to Internal Revenue Service rules. And the involved child care providers must report their income to the IRS.

But the overall trend is hopeful, Lilley said.

A recent study by the Work and Family Institute in New York showed that companies are not cutting so-called family-friendly benefits despite the recession. Another survey, by International Business Machines, discovered that its top-performing employees named family-friendly benefits as the second most important reason for staying with the company. Salary came first.

And Corning Inc. credits its family-friendly policies, coupled with programs to advance women, with cutting turnover among women managers in half.

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