Voluntary benefits.
Enhanced benefits.
Ancillary benefits.
Worksite benefits.
No matter what you call them, the time to consider them for your benefits package is now.
When it comes down to it, the more benefits you have in place for your team, the more attractive your benefits, and ultimately financial package, is.
Because there doesn’t have to be a company investment, this is a great way to bolster your benefits package without adding a cost center to your books. You simply withhold the premium through payroll deduction.
Employees appreciate the convenience of having the employer pull the authorized amount from the their check and handle the invoice. Both the employer and employee can benefit from pretax savings.
While no contribution is required, an employer can contribute to this type of coverage through the purchase of a policy.
I have clients who provide dental and vision coverage to their employees, paying 100 percent of the employee-only premium. If the staff wants to insure their family members, they may do so with the additional premium being payroll deducted.
Another way an employer could contribute is to offer a defined amount that the employee can spend the designated amount on a plan that best suits their needs.
There are many types of voluntary benefits, but some of the most popular are dental, vision, disability and life insurance.
Supplemental coverage
As a complement to the health insurance you are offering, supplemental benefits help your employee by providing cash benefits to help with out-of-pocket medical and related expenses. Think accident plans, cancer coverage, critical illness or hospital policies.
This coverage pays the insured on a fee-for-service basis, where the benefits paid are determined by the type of treatment the insured has received.
Here’s an example:
Susie has an accident policy through work. Her son gets injured on the football field. Her accident policy will pay her a specific benefit amount for the following treatments:
Emergency Treatment
MRI
X-Rays
Fractures
Torn ACL
Surgery
Follow-up Treatment
Physical Therapy
Appliance Benefit (crutches)
Ambulance (Ground)
If he had needed to be admitted, the policy provides for that, too. Depending on the policy structure, it can add up to quite a bit of money to help offset those additional expenses, like copays and deductibles.
This can be very helpful in a time of medical need.
Pretax plans
Premium for most of the benefits can be deducted on a pretax basis, thanks to your Section 125/Cafeteria Plan.
Not familiar with how that works?
Let’s assume, for round numbers, your employee has $1000 paycheck, is taxed at 25 percent and has $100 in insurance premium deductions. Below is an example of how that deduction would work. Bear in mind this savings is for both the employee and employer since FICA is a match.
Post-Tax Pre-Tax
Taxable Income 1000 Gross Pay 1000
Taxes -250 Insurance -100
Net 750 Taxable 900
Insurance -100 Taxes -225
Net Check 650 Net Check 675
Imagine what that savings could mean for each and every one of your employees, and for your business since FICA is a matched tax.
Additionally, whatever you invest in benefits for your staff may be a tax-deductible expense. As always, check with your CPA.
If you have questions about these benefits and how they could work for your company, I’d be happy to answer them.