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 benefits can range from life, disability, accident and cancer insurance to home, auto and even pet insurance, and prepaid legal services. Voluntary benefits are employer sponsored, which allows access to payroll deduction of employee paid premiums.
What are some of the advantages of voluntary benefits?
The biggest advantage for employers is the fact that they can offer benefits at no additional cost to their budget. Further, increased employee satisfaction is monumental in today’s world, and a voluntary benefits menu can be a tool to attract and maintain employees.
There are numerous advantages of voluntary benefits to employees. The opportunity to access a broad array of benefits and enjoy ‘loosened’ underwriting requirements and reduced premiums is of significant value. Also, these benefits are often not subject to medical underwriting. Voluntary benefits enable employees to secure benefits that they could not necessarily obtain on their own. Most often, voluntary benefits are purchased through the convenience of payroll deduction on a pretax basis.
What are some of the traditional versus nontraditional voluntary benefits?
Traditional voluntary benefit options typically include lifestyle protection coverage, such as life and disability insurance, critical illness coverage and long term care insurance. Auto and homeowners insurance and prepaid legal services are other benefits often included with lifestyle protection offerings. While these remain standard offerings, voluntary benefits have expanded to include many nontraditional benefits such as identity theft protection, pet insurance, funeral planning, wedding protection plans and concierge services.
Why are voluntary benefits a critical component of a benefits plan? ?
People have individual needs and unique circumstances. One person might have a high incidence of cancer in the family and therefore find value in a cancer policy, while another person may have several children and feel that the accident policy is useful because their children are always in the emergency room getting stitches. Participation requirements are generally very low, which allows employers to select multiple products to help meet the different needs of employees.
Are employees willing to pay for coverage if it’s offered at a reasonable cost? ?
With proper education, employees will evaluate their needs and participate in these programs. One of the primary goals is to make sure that employees understand the coverage options that are available to meet their specific situations. Employees of all types are a good fit for these products. But, voluntary benefits are especially effective for employees who work in industries that normally wouldn’t provide employer-paid coverage.
Retail, construction, manufacturing, food services and medical offices are good examples of industries that don’t always provide employer-paid programs. Since these industries often support many lower-income occupations, it’s very important to make sure the employees have assistance in evaluating their needs and are not overspending.
Why have voluntary benefits become so popular in today’s business world?
Employee-paid voluntary benefits have emerged as a viable solution to business owners who are struggling with rising health care costs and continuing a competitive employee benefits package. The demand for employee satisfaction and retention is also cited as a positive by-product.
But, knowing which voluntary benefits to offer can be a challenge. Employers should find a benefits consultant who is objective, knowledgeable about the nuances of voluntary benefits and willing to research the market on their behalf. There are numerous vendors and products available; employers need to ensure they are offering benefits that their employees want, will use and, most importantly, can afford.