Features of Voluntary Programs: Broad Reach Benefits
Voluntary employee benefit plans differ from traditional group plans in several key areas:
Traditional group benefits (such as medical, dental & disability) require the employer to pay some portion of the premium. Voluntary programs require No Employer Contributions! These programs are paid 100% by the employee through the convenience of payroll deduction. Even though no employer contribution is required, some employers choose to subsidize a portion of the premiums. The employees may pay their premiums (for certain products) on a pre-tax basis through a Section 125 plan. The result is a tax savings for the employee as well as the employer!
Traditional group benefits require high levels of participation, typically 75%. Voluntary programs require only 20% of the eligible employees to enroll.
Voluntary programs must be designed to deal with adverse selection. If you were an insurance company would you sell guaranteed issue life insurance to patients in the intensive care unit of your local hospital? Offering your employees a voluntary insurance plan has the same initial effect. Everyone who needs a new bridge or crown can’t wait to sign up for a new voluntary dental plan so they can go out and have their work started. Properly designed voluntary plans take adverse selection into account through plan design and pooled risk.
Advantages of Voluntary Benefits
No Employer Costs
Voluntary benefits are a great way to provide employees with the benefits they want and desire with little or no cost to the company. Any additional administrative costs can be offset by the payroll tax savings the employer gains from Section 125.
Highly Desired Benefits
How many times have employees or prospective employees asked about benefits like dental, disability or additional life coverage?
Companies with strong employee benefits packages have lower employee turnover and find it easier to attract prospects looking for employment. This is critical when the employment pool is reduced due to high levels of employment.
By utilizing the purchasing power of your group, the employees get access to benefits at low group rates.
Disability coverage and life insurance are extremely difficult to find on an individual basis if the insured has a less than favorable medical history. These products have simplified underwriting requirements or in many cases are guaranteed issue (no health questions!).
No Secondary Market
Some programs (i.e. Indemnity dental plans) are only available through employer sponsored plans. Employees can not simply go home and contact their local insurance agent to purchase coverage.
Just talk to our clients around the country to hear how their employees love these plans!