Offering Voluntary Benefits: The Business Case for Employers and Brokers
In this post we're going to discuss everything there is to know about voluntary benefits for employers and brokers.
The requirement to fill jobs in companies is becoming more challenging due to the growing number of people working in conjunction with the historically low youth unemployment rate.
As a result of these emerging problems, businesses are investigating various methods by which they might attract, acquire, and retain top talent working for their company or organization. One way is to overhaul the perks they provide for their workforce. This often entails the implementation of an all-encompassing bundle of voluntary employee benefits for employee satisfaction.
What are Voluntary Benefits?
Plans offered to workers at a cost to the company that is minimal to nonexistent are referred to as voluntary benefits or supplemental insurance. They allow workers to enroll in coverage at considerably reduced rates than what they would pay as individuals. These benefits often help employees cover expenditures that other forms of life insurance or health insurance may not pay for.
Employers may give broader coverage without incurring additional expenses and even save money on taxes by offering voluntary benefits to their employees. As a result of the fact that premiums are deducted from pay before taxes are taken out, employers end up paying less in payroll taxes—resulting in a win-win situation for both you and your workforce.
At Corestream, we want to ensure that when we use the term voluntary benefits, we don't assume we know what you define them as or that you know what we are referring to when it comes to our solution. Out of many available terms, we focus on the 'voluntary' label because it's the precise definition of employee choice.
Simply put, these benefits are 100% chosen and paid for (most commonly) by the employee. Granted, the employer works to make a specific level or carrier available, but in the end, the employee has autonomy over whether they want to participate or not.
Common Examples of Voluntary Benefits
Some examples of voluntary benefits packages include disability, critical illness, life, accident insurance, pet coverage, legal services, identity theft protection, hospital indemnity, long term care, vision insurance, and financial counseling. These are granted via an employer but paid for partly or entirely through payroll deferral by employees.
Types of Voluntary Benefits
Businesses have the potential to add voluntary benefits to their coverage packages for very little or no additional cost to themselves, allowing workers to personalize their benefits and the comprehensive coverage they need. The following are the types of optional perks that are most often selected.
Health: Benefits that fall under this category may include critical illness insurance, cancer insurance, or accident insurance. These supplemental insurance plans safeguard against unforeseen medical bills and the financial losses linked with them.
Financial: Employees can better handle their own money when they have access to financial advantages. A wide variety of subjects are covered, including but not limited to: small affordable loans, credit building, tax advice, investment advice, tax advice, saving advice, and budgeting benefits.
Wellness/Lifestyle: Wellness and lifestyle are a far broader category when it comes to voluntary benefits. The advantages it encompasses might range from legal services, or memberships at fitness centers to online access to mental health therapy and medical care.
Personal/Miscellaneous Perks: Personal benefits include remote work policies and pet coverage, which may provide workers better peace of mind and assistance within and outside of the office. Other personal benefits include a 401(k) plan for retirement savings.
Security: Theft protection is the primary focus of the security benefits. These choices provide a direct cash advantage and cover the possible losses that may occur due to occurrences like the theft of an individual's identity or the passing away of the policyholder.
Now that you know some common types of voluntary benefits, the question is, what exactly do these supplementary options involve? The following are five instances taken from real life that illustrate the beneficial influence that offering optional perks may have on your company.
- A business expanding its benefits offerings to include life insurance and disability coverage.
- The employee benefits package at a large hospital includes pet coverage.
- A technology start-up provides short-term or long-term disability insurance to its employees.
- A restaurant chain upgrades its employee perks to include dental and eye care choices.
- A company provides help for mental health issues and financial advice for workers.
Pre Tax Benefits
Any money deducted from an employee's gross pay before taxes are taken out of the paycheck is said to be a pre-tax deduction. Due to these deductions, the employee's taxable income decreases, which means they will owe less in the form of income tax. They could also have a lower FICA tax obligation, covering both Social Security and Medicare. Deductions made prior to taxation can reduce taxes paid by employers, such as the Federal Insurance Contributions Act (FICA), State Unemployment Insurance (SUI), and Federal Unemployment Tax (FUTA).
Every year, the regulations that regulate deductions made before taxes may be subject to alteration by the federal government. Before making any adjustments to payroll, you should make sure that you have the most recent information on pre-tax deductions.
Pre Tax Benefits List
The following are some examples of expenses that may be deducted from the gross income before taxes are applied.
- Short-Term Disability
- Long-Term Disability
- Medical Expenses
- Dental Insurance
- 401(K) Contributions
- Healthcare Insurance
- Health Savings Account Contributions
- Dependent Care Assistance Programs
- Child Care Expenses
- Adoption Assistance Programs
- Employer-Sponsored Accident and Health Plans
- Supplemental Insurance Coverage
- Flexible Spending Accounts
- Group Term Life Insurance
- Commuter Benefits
- Retirement Funds
- Tax-Deferred Investments
- Vision Benefits
- Parking Permits
Several deductions and contributions can be claimed as tax breaks before they are actually paid. Consider the following illustration of how to compute a deduction before the application of taxes:
Pre Tax Benefits Example
An employee receives a total of $1,000 in gross salary for each pay period. In addition to that, a $50 HSA deduction is taken out of each paycheck. The employee's taxable income will be reduced to $950 after the first step of deducting the pre-tax withholding from the employee's gross compensation. At this stage, you can deduct taxes from the employee's compensation. There should not be any taxes withheld from the total amount before removing the HSA funds or making any other pre-tax deductions.
Additional instances of deductions that may be made before taxes are as follows:
Retirement Fund: A standard 401(k) may sometimes be seen as a tax-deductible prepayment for retirement funds. Before the income is taxed, both the employee and the company have the opportunity to make contributions.
Health Insurance: Pre-tax deductions may be taken for contributions made to health benefit plans such as an HSA or FSA. If an employee participates in a company-sponsored health insurance plan and pays out of pocket, they may be eligible for pre-tax deductions.
Benefits for Commuters: Employees are eligible for fringe benefits deposited into an employer-sponsored account. This account is treated as a deduction before tax. A company may, for instance, deposit $100 into a commuter account every month so that the employee can use it to pay for a bus pass or train tickets.
Benefits offered 100% voluntarily with no employer contributions are offered post-tax. Employers can choose to provide certain benefits on a pre-tax basis when they contribute. In the case of specific benefits, it makes a significant difference in the bottom line.
At Corestream, all benefits are offered post-tax. Since the Corestream value proposition revolves around employee choice and empowerment, no mandatory benefits are ever loaded on the platform.
Are You Operating Under Old Stigmas?
As decades have passed, voluntary benefits have further evolved. In 2021, Willis Towers Watson, a leading global advisory, brokerage, and HR solutions company, discovered that 65% of large employers plan to prioritize the integration of well-being into the benefits package in the next two years.
For many years, employers only thought about supplemental health benefits such as critical illness insurance or hospital indemnity to be a synonym for voluntary. However, today, categories cover all aspects of employee wellness, such as financial and personal, not just physical health.
Ancillary benefits such as life insurance, dental, and vision insurance tend to muddy the waters and add complexity. Examples of voluntary employee benefits include identity theft, legal services, pet insurance, and mental health benefits in today's modern concept.
A healthy mix of these contributes to increased employee satisfaction. However, we must not lose sight that the most critical and time-defying characteristic of voluntary benefits is that they provide an attractive value proposition to the employees that aren't available directly or at a higher cost.
Money-saving group rates make these benefits a great addition to your benefits plan.
What are "Mandatory" Benefits?
Benefits that are legally compelled to be provided to workers by their employers and referred to as mandated employee benefits. Even though state laws could be more generous, federal law makes it obligatory for companies to offer their workers certain benefits. In most cases, an employee will get compensation in some form or time off work; however, businesses with fifty or more workers are mandated to provide their staff members paid time off for family and medical obligations.
Mandatory Benefits List
The following are often considered to be required benefits for employees to receive:
- Civic Duties
- Disability Insurance
- Workers' Compensation
- Unemployment Insurance
- Family and Medical Leave Act
Offering Voluntary Benefits
If there was a way to improve the complete benefits package for employees that required little to no additional cost, would you take advantage of it? Of course you would, and voluntary benefits are your best bet here.
In the modern business environment, where a wealth of choice is at our fingertips, it is becoming more crucial to provide workers a range of options when it comes to the benefits they get while maintaining a balance between what you can realistically offer—this is where voluntary benefits come in.
Business Advantages of Offering Voluntary Benefits
Here are some business advantages of offering voluntary benefits:
- Helps in attracting top talent.
- Supports in retaining valuable employees.
- Provides cost savings benefits for the company.
- Supports the financial well-being of employees.
- Enriches existing core benefits of your business.
- Reduces 401(k) and 403(b) loans and withdrawals.
- Helps in appealing to a multi-generational workforce.
- Increases employee engagement and productivity.
Voluntary Benefits Offer Advantages for Both Employees and Employers
Through a knowledge partnership with Duke University, after analyzing millions of Corestream enrollment records, we learned a cause-and-effect relationship between enrollment and tenure. The connection is so strong that it influences tenure to reach twice as much time as employees who didn't enroll. In this case, it's the difference between 3 and 6 years of tenure.
From an employee's perspective, the more benefits are accessible, the more they can decide what's suitable for their individual needs. Employee populations in large companies touch every aspect of diversity, and it's challenging for organizations to ensure inclusion and diversity is addressed through their benefits strategy.
Human resources and benefits leaders and administrators have grown to believe that adding benefits is an inevitable burden. However, technological advancement now allows multiple benefits without increasing resource strain.
Pros and Cons of Funding Employee Benefits
Doesn't providing perks to employees simply mean more money out of pocket for the employer? Here, the question arises: why should an employer offer them? When determining whether or not giving employee benefits would also help your business, the following are some factors to consider.
Pros of for Funding Employee Voluntary Benefits
- An attractive benefits package, particularly one that includes adequate medical coverage, is an effective tool for recruiting and retaining qualified talent in the corporate market.
- A tax deduction may be used for donations made by businesses to retirement plans.
- Employees often choose to have improved benefits rather than a more significant base income, resulting in cost savings for the employer and the company.
- Research shows that providing health insurance via employee benefits programs may reduce absenteeism while improving their health and morale.
Cons of Funding Employee Voluntary Benefits
- Mistakes in employee benefits can lead to litigation.
- The pressure of meeting regulatory compliance.
- Even great benefits can be seen as "not enough."
How to Set Up a Voluntary Benefits Plan
Whether you are the owner of a business with as few as two employees or as many as 100,000, you should investigate the possibility of providing employees with voluntary benefits. Insurance purchased via a voluntary benefits vendor may be more cost-effective, have less stringent conditions for membership, and in some instances, provide a guarantee of coverage.
These perks may assist you in maintaining your competitive edge, as well as attracting and retaining talented individuals. There are several distinct methods in which benefits may be provided voluntarily:
Traditional Voluntary Plans: These plans are those in which the employee foots the whole bill for the program. Employees pick the benefits that fulfill their requirements and financial constraints to the greatest extent possible, sometimes at reduced group prices.
Voluntary Buy-Up Plans: In this type of plan, the employee has the choice to purchase extra coverage, but the employer is responsible for paying for the baseline level of coverage.
Multi-Coverage Plans: This plan offer workers a convenient experience at reasonable prices. Products offering basic protection are put together to make selection and pricing easier.
Why Benefits Brokers Should Offer Voluntary Benefits
Benefits brokers face challenging times due to various issues converging on one another. Make your selection from among these major ones:
- A struggling economy.
- Excessively low commission rates.
- Uncertainties surrounding health care reform.
- Reduced contributions from employers to medical insurance.
The facts mentioned above are not trivial problems that will be resolved in the following months or years. The process of selling employer-funded benefits may be complicated even when the sale conditions are favorable. Brokers need to find a means to fill their own sales pipelines to remain competitive despite all of the macroeconomic issues that are now impeding activity in this sector.
The question is, how can a broker get their income flowing back in the right direction? The solution might be in the form of voluntary benefits.
Employers are experiencing huge budgetary issues in delivering decent programs to their workers. The costs of such benefits often surpass their capacity to continue providing the same level of benefits as before.
Therefore, the dilemma that places businesses "between a rock and a hard place" may be addressed with voluntary benefits. Workers supplied with optional plans continue to consider these programs a significant perk of their employment.
Traditional kinds of voluntary benefits are often already provided by most benefits brokers or consultants. In conclusion, a broker-friendly software solution for voluntary benefits that offers businesses a simple and effective user experience for their workers needs to include all of the conventional and current perks that are the most in-demand market today.
Innovation in Employee Benefits
To help major enterprises remain competitive in a demanding labor market, we have partnered with the leading benefits firms on a national, regional, and local level. By working with an innovative technology like Corestream, brokers can provide customers with the most up-to-date and in-demand optional advantages.
Voluntary Benefits @ Corestream
In this era of increasing benefit costs and tighter bottom lines, nobody can blame businesses for wanting to find methods to improve their employee benefits program while spending as little as possible or spending nothing at all—and over the years, voluntary benefits have fulfilled that role for many organizations and businesses. Now that you know the nitty-gritty of a voluntary benefits package, it's time to join hands and partner with a customizable and user-friendly platform.
At Corestream, we make available a variety of voluntary and flexible benefit plans to meet the requirements of every company that we collaborate with. If you have any questions or requirements relating to the employee benefits schemes, our team will be pleased to help you. Visit Corestream.
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