Tough economic times mean tough decisions for businesses. Between rising health insurance costs and the economic tailspin, employers are struggling to maintain competitive employee benefits packages. If you’re like millions of business owners, you have likely increased your employee contributions and reduced benefits in order to cut costs.
The need to reduce core benefits has triggered demand for voluntary benefits. According to a 2008 study by the Employee Benefit Research Institute, employer-paid benefits are declining while worker-pay-all or voluntary benefits are increasing. This trend is likely to continue.
Voluntary benefits are an excellent way for a company to add value to an existing benefits plan or offer employees the ability to “fill in the gaps” when core benefits are reduced.
“Employers can no longer afford to pay full premiums for life and disability coverage, dental and vision benefits, travel and accident protection, and so on,” says Michael Galardini, sales executive for JRG Advisors, the management company for ChamberChoice. “Instead, they are realizing the value in offering a menu of benefits, a la carte style, and allowing employees to choose the benefits they want and can afford.”
Smart Business spoke with Galardini about voluntary benefits, how to implement them and why they can be so beneficial.
What are voluntary benefits?
Voluntary benefit plans are typically sponsored by an employer and paid by the employees via payroll deduction. Some common types of voluntary benefits include term life insurance, long-term disability insurance, dental insurance, vision insurance, accident plans, cancer plans and ‘gap’ insurance.
Why voluntary benefits?
Due to the rising cost of medical insurance and challenging economic times, employers have been forced to reduce the level of benefits they provide. It has become increasingly difficult to pay for core benefits. Employers who offer first dollar medical coverage are becoming nonexistent as companies increase deductibles in order to reduce costs. Voluntary benefits can help employees bridge any ‘gaps’ in coverage. Instead of paying for disability, life, dental and vision insurance as core employee benefits, business owners have begun to realize the advantages to providing these types of products on a voluntary basis.
The advantages of voluntary benefits are numerous. Providing products on a voluntary basis, a la carte style, allows employees to choose what they need and what they can afford. Voluntary benefits cost employers virtually nothing and they provide access to several types of insurance coverage with less stringent underwriting requirements at group rates lower than if employees purchased the products in the individual market. Often, these benefits are not subject to medical underwriting and can be purchased on a pretax basis. Voluntary benefits enable employees to secure benefits they could not necessarily obtain on their own.
