Picking the Best Benefits

Many employers today want to offer a robust package of employee benefits to their employees to remain competitive in the marketplace and entice and retain high performing employees. What should you, as an employer, consider when deciding what to offer, when to offer it, and who will be eligible? Let’s talk about the decisions that go into offering health insurance. There are Affordable Care Act compliance issues that will come into play depending on the size of your organization. These compliance issues are beyond the scope of this article, so for purposes of this article, we will assume the employer has less than 50 full time equivalent employees and is not subject to the employer mandate.

Which benefits will you offer? To whom will you offer them? First, consider what benefits you want to offer. Are you only interested in health insurance? Your employees may also be interested in, and willing to pay for, other types of insurance such as dental, vision, long-term disability, short-term disability and life insurance.

You may be able to offer these additional coverages at little or no cost to you, as the employer. The employees will have the advantage of lower cost group rates and most plans are eligible for pretax payroll deductions through a cafeteria plan, if available.

Consult with a PEO (Professional Employer Organization) for coverage and administration options or consult an insurance agent to get quotes for group coverage from various insurance carriers in your region. Be prepared to provide the agent with a census of your employees. This is a list of employees along with their demographic information.

Consider the cost The insurance premiums and benefits are relational. The “richer” the benefits, the more expensive the plan. The ease of access and size of the network also play a role in the cost of a plan. You can help keep the cost of premiums affordable by choosing a narrower network (usually an HMO) and increasing deductible and/or co-pays. Pleasing your employees with your choices and offering affordable health care is a balancing act. You want your employees to have access to health care when they need it, but you also want them to be able to afford to use the services. Your agent can help with communicating the plan benefits and costs to the employees.

You may also be interested in offering a high deductible health plan that is compatible with a Health Savings Account. If an employee enrolls in a high deductible health plan, you have the option of making an employer contribution to the employee’s Health Savings Account. This is a great savings tool for employees.

Consider who the eligible employees will be, how many employees you expect to enroll in coverage and which employees have other coverage to ensure you can meet the participation requirements of the insurance carrier. Also, consider what the required employer contribution to the health insurance is. For small group insurance, the insurance carriers usually will require an employer contribution of 50% of the employee only premium for the least expensive plan offered.

Example: An employer offers two plans to employees who work 30 or more hours per week. The premium for employee only coverage under Plan 1 is $600 per month and for Plan 2 is $725 per month. If the insurance carrier requires an employer contribution of 50% of the employee only premium for the least expensive coverage, then the employer must contribute a minimum of $300 per month for each employee who elects coverage. This $300 will apply regardless of the coverage level or plan the employee chooses unless the employer opts to contribute an additional amount towards dependent coverage.

Once you have selected the carrier and the plans you want to offer, you need to consider the timeline and how to communicate the information. What will the waiting period be for newly hired employees? Will you have access to an online enrollment program? What is the most effective way to communicate this information to your employees? You should utilize your insurance agent to assist with the communication and employee meetings to discuss the benefits being offered. This is also helpful as the agent can answer specific employee questions relating to coverages or confidential medical conditions.

Plan Maintenance and Administration Also, as new employees become eligible for the insurance, determine who will maintain the enrollments with the carriers and process changes or terminations of coverage. Are you subject to COBRA (the Consolidated Omnibus Budget Reconciliation Act of 1985) due to your organization size and does your state have any laws regarding continuation of coverage?

You also need to determine if you need an ERISA (Employee Retirement Income Security Act) wrap document. Will you be subject to annual filings with the IRS and DOL?

Who will provide the employees with the required notices and disclosures to meet compliance requirements? You will also want to make sure you have a resource to keep you up to date on changes to laws and regulations.

I know this probably sounds like an enormous amount of work just to offer health benefits or other benefits to your employees. Many of these items will be addressed in the initial discussions with your insurance agent and will not require ongoing research and attention. It is also important to remember that you will have open enrollment annually and prior to the open enrollment, you can make changes to plan design, carriers, networks, etc. You are not locked in to your initial decisions and offerings forever. In addition, a PEO can handle open enrollment, benefits administration, claims handling, and other administrative elements that make offering employee benefits so overwhelming.

It is also important to stay in contact with an advisor, whether it is a CPA, attorney, or insurance agent, to keep you abreast of changes in rules, regulations and laws regarding employee benefit plans and structures. This will ensure you remain compliant and can offer your employees a competitive package that will keep them healthy, happy, and employed with you!