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Voluntary Benefits Meet Diverse Employee Needs

Small businesses might be missing an opportunity to enhance their benefit programs and employee loyalty! 

In a 2009 survey by the nonprofit International Foundation of Employee Benefit Plans, 84 percent of employers responding said they offered some type of voluntary benefit. An additional 5 percent planned to offer them. 

Most employers use voluntary benefits to enhance their life and health benefit portfolio, as reflected in the benefits most frequently offered by employers who offer voluntary benefits: 

  • Term life, 73 percent
  • Vision insurance, 53 percent
  • Long-term care insurance, 51 percent
  • Long-term disability insurance, 50 percent
  • Accident insurance, 49 percent
  • Dental insurance, 48 percent.

 Source: Top Trends in Voluntary Benefits, 2009. International Foundation of Employee Benefit Plans 

The 2009 MetLife Study of Employee Benefits Trends found that while small businesses offer medical insurance at about the same rate as larger companies (95 percent and 96 percent respectively); the gap widens for other products. For example, only 65 percent of businesses with fewer than 500 employees offer dental insurance, compared to 93 percent of those employers with 500 or more employees. 

This occurs despite the fact that two-thirds of workers at companies with fewer than 500 employees report that benefits such as life, disability and dental insurance contribute significantly to their feelings of loyalty towards their employer, behind salary and wages (85 percent) and health benefits (71 percent). 

All employers, particularly smaller ones, might be reluctant to add expenses during these uncertain economic times. But many employers are missing an opportunity to enhance their benefit programs through voluntary programs, which cost them nothing.  

Under a voluntary benefits program, the employer offers employees a menu of benefits; employees select only those they want. Unlike traditional group benefits, voluntary programs require no employer contributions. Employees pay all of the premiums, sometimes on a pre-tax basis (for qualified benefit plans only), through payroll deduction. 

While traditional group benefits demand high levels of participation, typically 75 percent, voluntary programs require only 20 percent participation (for most health plans); other voluntary benefits may have no participation requirements. 

Another advantage of voluntary benefits is that they are non-discriminatory. Many benefits, such as dependent health and life benefits, dependent care savings accounts and adoption benefits, have value only for those with children or elderly dependents. They’re less likely to appeal to young singles, who might see these benefits as favoring older workers with families if the employer pays for them. With voluntary benefits, employees select and pay for only those benefits that they really want. 

Save on Payroll Taxes 

If you want to enhance your benefit package but think adding group life, dental, disability, critical care or long-term care insurance might be too expensive, take a look at voluntary plans.

Not only will they cost you nothing, employers can actually save money by combining voluntary benefits with a Section 125 salary reduction plan. The Section 125 plan allows employees to pay for qualified voluntary benefits (such as most medical and life benefits) with pre-tax dollars. This reduces their taxable income. 

It also reduces the employer’s payroll tax liability. Companies with a Section 125 plan can save hundreds of dollars per employee if employees participate in their voluntary benefit plans. In addition to health and life coverages, voluntary benefits include other programs, often called “worksite benefits.” These plans can help employees create a better work/life balance and include: 

  • Prepaid legal plans
  • Pet insurance
  • Funeral pre-planning services
  • Auto and homeowners insurance
  • Mortgages and other financial services. 

All can be paid by convenient payroll deduction and many of these programs offer savings over what your employees can find on their own. For more information on voluntary benefits, please contact us.