From 1999 to 2009, employer-sponsored family health insurance premiums have increased an average of 131 percent, from $5,791 to $13,375, according to the National Conference of State Legislatures.
Of that, workers contributed an average of $3,515, with the rest of the burden falling on the employer.
As a result, rising costs have forced employers to choose alternative solutions that shift cost sharing to the employee in the form of higher deductibles and/or co-payments, creating a greater interest in voluntary benefits, says Joanne Tegethoff, account executive at JRG Advisors, the management company for ChamberChoice.
“The work force today is much different than it was 25 years ago,” says Tegethoff. “More women are working today. And with the divorce rate at around 50 percent, there are more single parents seeking benefits. Long-term employment is becoming the exception, and employees are more mobile. All of these factors are making voluntary benefits more appealing.”
And because competition for top-notch employees is stiff, offering quality and comprehensive benefits is key to recruiting and retaining employees.
Smart Business spoke with Tegethoff about how voluntary benefits can help attract quality employees and lower your cost of doing business.
What are voluntary benefits?
Voluntary benefits are insurance products available to employees for elective purchase via payroll deductions. These benefits are sponsored and made available by the employer, but the employee is typically paying 100 percent of the premiums. Many of the products can be taken as a pre-tax deduction, which provides additional savings to both the employee and employer.
The benefits offered often depend on the type of medical coverage the employer offers. For example, employers with a high-deductible health plan with at least a $1,000 individual deductible typically offer short-term disability insurance, which provides income protection should an employee be disabled in an accident outside of work; accident insurance; critical illness insurance; cancer insurance; term-life insurance; and universal life insurance, which is a flexible, permanent policy offering the protection of life insurance, as well as a savings element that is invested and builds cash value.
Short-term disability is typically offered if the employer does not offer group disability, and universal life is typically made available to a work force with a younger average age.
If an employer has a medical plan with a low or no deductible, they will not generally offer critical illness insurance, which pays a lump-sum benefit upon diagnosis of a critical illness.
Less common voluntary benefits that are appreciated by employees include long-term care insurance, dental and vision insurance, prepaid legal services, identity theft insurance, auto and homeowner’s insurance, and pet insurance.
Keep in mind that employees may feel overwhelmed and find it difficult to make a decision when too many products are offered. A successful agent will help the employer sort through the choices and narrow down the product offering.
How can a company begin to implement a voluntary benefits plan?
The employer first needs to determine whether employees have interest in taking advantage of voluntary benefits. Survey your employees to determine the level of interest and need.
Once interest is determined, you will need to select an insurance company that best meets your needs. Not all companies and policies are the same. Talk with your consultant or adviser to determine your needs and for assistance with the insurance company selection and implementation process.
An employer will select an insurance company that hosts group meetings to explain the available benefits to its employees. The insurance company should also conduct one-on-one meetings with employees to discuss their individual needs. If they are not interested, employees should sign a waiver stating they are declining the offered benefits.
In addition, the agent and the insurance company should conduct open enrollment meetings every year for new hires and for those employees who may have changed their minds about participating.
Do employers have any fiduciary responsibilities associated with offering voluntary benefits, even though they are not contributing financially?
Although most employers do not contribute to the cost of voluntary benefits, they still have a fiduciary responsibility under ERISA to police such plans if they engage in the promotion or distribution of benefits information related to these programs. They also have a fiduciary responsibility if they allow payroll-deducted payments on a pretax basis through a Section 125 cafeteria-style plan.
What does an employer gain by offering voluntary benefits?
Voluntary benefits add value and financial security to a company’s employees without impacting the employer’s bottom line. By implementing voluntary benefits, employers acknowledge the needs of their employees and allow the employees to select benefits based on their individual needs.
Joanne Tegethoff is an account executive at JRG Advisors, the management company of ChamberChoice. Reach her at (412) 456-7233 or [email protected]