For employers looking at insurance options, cost can be a major factor in your decision. For some required types of insurance, like disability, you might wonder how much these policies cost employers.

The cost of disability insurance for employers depends on the type of business, amount of employees, age, gender mix, percent of coverage, maximums, elimination periods,  coverage definitions and limits, and location

Disability insurance will provide your employees income security when needed.

In this post, we discuss what disability insurance covers, the cost of disability insurance for employers, and how to find the best plan for your company.

Why Do Employers Offer Disability Insurance to Employees?

Disability insurance is a type of employee benefit that pays income if employees cannot work due to a non-work-related accident or illness. The insurance is needed more than you might think: About a quarter of 20-year-olds will become disabled before they retire, according to the U.S. Social Security Administration.

Disability insurance covers a large portion of a worker’s income when they lose their ability to work due to an illness or injury not resulting from their job. It generally replaces 60% of a policyholder's annual income up until retirement age – typically 65 years old.

In many cases, you may be required to purchase certain types of disability insurance when you have employees. U.S. government regulations generally require companies with employees to have a minimum of workers’ compensation, disability and unemployment insurance. Some states can require additional insurance, depending on your business and how hazardous it is.

Your business is explicitly required to carry short-term disability insurance for employees if you operate in a state where this coverage is mandatory. States currently mandating commercial disability insurance include California, Hawaii, New Jersey, New York and Rhode Island.

Otherwise, insurance requirements vary by state, so visit your state’s official commerce website and speak with an insurance broker to find out exactly what your business needs.

Offering this benefit is crucial to many employees, because rates for group plans are almost always less expensive than rates for individual coverage. Since your company is buying for many people on a consistent basis, the premium typically is much lower than individuals can get on their own. This is typical of any group policy versus an individual policy.

In short, almost every business needs group disability insurance to safeguard its employees in the event of serious injury or illness. The coverage also alleviates the company from determining when to pay and how long to pay a disabled employee and the liabilities therein. It transfers that to the insurance carrier.

What Does Disability Insurance Cover?

There are two types of disability insurance: short-term and long-term.

Short-term disability insurance covers a portion of an employee’s salary for a short period of time. The length of time varies from policy to policy, but typically covers three to six months after the incident that qualified them as disabled. Long-term disability insurance, meanwhile, is used when the policyholder is disabled to where they are unable to work for more than six months.

Importantly, disability Insurance does not cover work-related injuries. Workers’ compensation insurance is used instead for accidents occurring on the job or work-related illnesses.

Disabilities from sickness and illness triggering coverage generally include chronic conditions like cancer, heart disease and back problems, along with off-the job injuries and, sometimes, pregnancy. Pregnancy coverage is an important benefit if your business expects to offer paid maternity benefits, as short-term disability partially compensates leaves of absence due to childbirth.

If your business offers or plans to offer disability insurance, you should familiarize yourself with the Employee Retirement Income Security Act (ERISA). These federal regulations, along with state guidelines, dictate how disability claims are made and what standards your group insurance policy must meet.

The cost of premiums for this type of coverage will vary for every organization and every insurance carrier. Researching coverage terms and prices, along with speaking to the right insurance experts, will tell you what makes the most sense for your business and lead to the best coverage.

The Cost of Disability Insurance for Employers

The disability insurance policies you can choose and how much you pay for them vary depending on your business’s industry, among other factors. Costs for coverage are affected by the perceived risk of employees in your industry and the stability of the workforce.

According to the Bureau of Labor Statistics, short and long-term insurance plans generally cost $0.15 per employee, per hour worked on average. This works out to a premium cost between 1% and 3% of an employee’s total compensation. Monthly premiums – how much you and/or employees pay for the policy – range from about $25 to $600, but this varies depending on many factors.

To determine pricing and coverage limits for these policies, disability insurance providers group jobs into specific occupational classes taking into account the hazards of the job and typical risk profile. Much of this figure is based on the historical claim experience associated with certain professions. However, the size of your business generally will not change the cost of disability insurance for employers. All else equal, a small business owner is often subject to the same rate as a large enterprise. The rate is made up of many factors that include loads and discounts.

Of course, employers take many different approaches to benefits and the insurance policies dictating them. Some businesses cover disability insurance premiums in full, while others ask employees to contribute a small portion to participate.

Contributions that an employer makes or the employee make have tax consequences to the benefit. This is best reviewed by a professional insurance broker, agent or advisor.

The cost of short-term disability premiums are similar to, but generally more expensive, than long-term premiums. Employers are not legally required to offer long-term disability coverage, but many mid-sized and large corporations offer it to workers as a benefit.

How Do I Find the Best Disability Insurance Plan for My Company?

There is no limit to how many employees your business can offer disability insurance, and much of the workforce sees it as an essential benefit. Having coverage will not alleviate the risks your employees face outside of work, but it will protect them financially when tragedy strikes.

Insurance brokers and benefits brokers can research coverage options, conditions, limits and costs across multiple insurance companies, and recommend policies that best fit your needs. They can eliminate your need to learn about the intricate details of disability insurance requirements, making it easier to choose the insurance that will provide your employees security and fit your budget.

To decide which insurance you need and find the best disability insurance plan for your company, consider using an insurance broker who knows what you need and can get you the best rates. Start your broker search at Mployer Advisor, a free broker marketplace that allows employers to compare brokers, consultants, and advisors in one place.

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Looking for more exclusive content? Check out what’s trending on the Mployer Advisor blog, and be sure to catch the latest episode of This Week in Benefits.

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Property and casualty insurance policies help protect your business against damage, financial losses, legal claims, and covered perils. But finding the best coverage means paying a broker or advisor, and many companies wonder how property and casualty insurance agents make commission.

A property and casualty insurance agent makes commission when they purchase or renew insurance on your behalf.

Most standard business insurance policies have property coverage and casualty insurance, which includes general liability coverage and business interruption coverage. Agents and brokers finding such coverage for you earn commissions at the time a sale takes place or upon being assigned your broker of record.

In this post, we discuss the importance of property and casualty insurance, along with how a property and casualty agent makes commission.

How a Property and Casualty Agent Earns Commission

Insurance types in the property and casualty specialty include business liability, commercial automobile, flood, workers compensation, and other coverages. The cost of these business insurance policies depends on the type of business, number of employees, deductibles, and coverage limits.

Regardless of the price, property and casualty insurance agents typically are compensated through a commission based on a percentage of the policy premium.

In most cases, commissions are paid by the insurance company that the employer chooses. It is usually a percentage of the premium for the policy, and may or may not be built into the retention component of the premium cost. This compensation may include base commissions and supplemental (or contingent) commissions.

Property and casualty insurance agents typically earn between 7% and 20% commission on each policy they sell. The amount varies depending on factors including the type of insurance product, risk classification, whether the policy is new or a renewal, and services provided to your company. Commissions for renewing policies are typically less than the initial commission paid for new business. This renewal may include a persistency percentage based on all of the policies of the broker’s different clients that are in-force with a specific insurance carrier.

Some brokers are paid solely through commissions for policy purchases and renewals, and some include other fees. Sometimes a fee is charged as they take on consultant (or advisor) roles. Some states have restrictions on these non-commission payments.

As agents and brokers take on more advisory responsibilities, fee-based compensation has become a more common payment method. Usually called a “fee for service agreement,” these fees may be paid by insurance companies or may be directly billed to the client.

As your business grows and changes, you should expect your insurance broker to provide decision support. To earn their payment, brokers and consultants should be involved in your plan several times per year, helping make decisions that complement your overall business objectives.

To avoid unexpected costs, you should know the services and fees upfront, examine your agent or broker’s relationship with insurers, and understand the difference between insurance brokers and insurance agents.

When evaluating insurance brokers, be sure to explore online ratings and benchmarking studies that show who is in your market.

Find a property & casualty insurance broker near you.

Why Is Property Insurance Important to a Business?

Property insurance covers financial losses resulting from damage to your business' physical assets, such as buildings or furniture. It also helps replace other property that is essential for your operations, including machinery or computers.

Depending on the specific limits of your policy, different perils may be covered. Covered perils can include problems such as theft, storms, rioting/looting and equipment malfunctions.

For example, if your business property is damaged or lost by various common incidents, such as fire or theft, property insurance compensates some or all of the related expenses. This extends from your company’s buildings or structures to personal property like office furnishings, materials, inventory and machinery.

Property insurance is important to your business because it protects assets including (but not limited to):

• Buildings owned by your business
• Permanently installed equipment on your property
• Contents within your building, including inventory
• Outdoor property that is located on the premises
• Finished and unfinished goods, if you are a manufacturer
• Machinery that suffers a breakdown, such as boilers, refrigerators or HVAC systems

If you have special property, equipment or goods that would be expensive to replace, do not assume that it is covered by your insurance policy. Speak with your agent or broker to make sure you have the coverage you need before disaster strikes.

Should Companies Buy Casualty Insurance?

Commercial casualty insurance is a broadly used insurance category that mostly comprises liability coverages. It refers to the liability-related pieces of property and casualty insurance. Casualty insurance covers damages and settlements your business might have to pay because of an incident related to your company or property that injured a third party.

Most, if not all, companies should purchase casualty insurance along with property insurance. For this reason, they are often bundled together into a business owner’s policy (BOP) or other umbrella policy. The specific coverages most appropriate for your company depend on how you operate, inherent risks in your industry, and what your employees do day to day.

Here are the most commonly purchased types of commercial casualty insurance:

• General liability insurance: This casualty insurance protects businesses from claims or lawsuits by customers and other third parties for property damage, bodily injury or personal and advertising injury. Personal and advertising injury includes damage to a person’s or organization’s reputation due to false advertising, slander or libel.
• Customers may claim your business has harmed them due to defective products, service errors or employee negligence, among other sources. General liability insurance compensates you for these types of claims and other legal defense costs, if you are found liable. It also typically covers medical bills for people injured by your company or on your commercial property.
• Workers' compensation insurance: This coverage is mandatory for employers in most U.S. states. It pays the required benefits to employees who get injured on the job, including compensation for medical bills and payments for a portion of lost wages. Depending on the states your business operates in, employers must have workers’ compensation insurance when there are more than three to five employees.
• Commercial auto insurance: This covers potential liability and damage related to your commercial vehicles, such as trucks and vans. If your company’s vehicles are damaged or destroyed, commercial auto insurance coverage covers costs for most of the damages.

There are other types of exposures and coverage solutions. Using an independent agent or broker is one of the best ways to make informed choices about property and casualty insurance. You will not have to spend time to be an expert on each coverage type and insurance carrier, because they can make it easy to understand your options.

A good property and casualty agent will work with you to research coverage, conditions and prices, and can recommend policies that best fit your company’s needs. Working with a professional will lower your opportunity costs and provide you opportunity to run your business.

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An insurance broker can save money for your business by procuring better rates and coverage than you could find and purchase on your own. And the best part? The insurance company usually pays them commissions – not you. But many businesses wonder if brokers have a fiduciary duty to serve in their best interests.

The good news is that insurance brokers do have a fiduciary duty to their clients.

When you hire an insurance broker, they work directly for you – not the insurance companies. So, you can think of an insurance broker as an intermediary between insurers and businesses, with no stakeholder interest in the policy itself.

In this post, we discuss a broker’s responsibilities to clients, how they are paid, and the fiduciary duties of insurance brokers and agents.

What Are an Insurance Broker’s Responsibilities?

An insurance broker's main responsibility is to understand your business and find fitting insurance policies within your budget. They also provide ongoing services to help determine if policies should change, assist you with compliance, and help submit claims and receive benefits.

Some insurance brokers focus on specific industries or types of insurance, while others provide advice on many different business insurance and benefits options. For example, brokers specializing in property and casualty insurance help small businesses find coverage for risks like natural disasters and lawsuits, while group health and life insurance brokers will assist companies with benefit plans.

Many insurance brokers and advisors will also act as an extension of your human resources team. When you need to reconsider policies or file a claim, your insurance broker can be a liaison between you and your insurance carrier. Because brokers work for you, not the insurance company, their advice should serve your company’s best interest.

On the other hand, since they are paid by commissions by insurers based on premium costs, brokers could be confronted with conflicting incentives and fiduciary responsibilities. Understanding whether insurance brokers have a fiduciary duty first requires understanding how they are paid.

How Are Insurance Brokers Paid?

Not all brokers are compensated in the same way, so the commissions or fees they collect may be different.

Insurance brokers typically are paid through a commission based on a percentage of your policy premium. In most cases, commissions are paid by the insurance company that the employer chooses.

Sometimes, brokers will charge fees as they take on consultant (or advisor) roles, providing ongoing services that go beyond buying and renewing policies. You should know if your broker or agent charges fees, and who pays the fees, before they start searching for insurance policies on your behalf.

Some brokers are contracted for several years, so you might need to pay broker fees through the contract term, regardless of policy changes, unless the broker violated your contract. Broker fees are usually non-refundable, so you will still have to pay if you cancel your policy mid-term, unless your insurance broker violated your contract.

Employers should know how their brokers are paid, but insurance policies are seldom simple, so you will need to ask about every potential fee or commission. To avoid unexpected costs, you should know commissions and fees upfront, examine your broker’s relationship with insurers, and understand the difference between insurance brokers and insurance agents. Good brokers have no issue with transparency.

What Does It Mean to Be a Fiduciary?

A fiduciary is a person or group (such as a brokerage firm) that acts on behalf of your company, putting your interests ahead of their own. So, being a fiduciary requires being bound legally and ethically to act in a client’s best interests.

Fiduciary duty requires that a representative in a position of trust, such as an insurance broker or advisor, must act in good faith and honesty on behalf of a client.

Insurance brokers  voluntarily accept this fiduciary responsibility and agree to carry out that responsibility in good faith. Legally, that means fiduciaries must act reasonably to avoid negligence and not favor anyone else's interest (including their own) over your company’s interest.

Avoiding conflicts of interest is crucial to acting as a fiduciary, so a broker or advisor must disclose any potential conflicts to them serving your interest ahead of their own or the insurer’s.

Fiduciary certifications, along with insurance broker licenses, are managed at the state level in the U.S. and can be revoked by the courts if a representative neglects their duties.

What Is an Insurance Agent’s Fiduciary Duty?

You might wonder if insurance brokers have your best interest at heart. In most cases, they do. When you hire an insurance broker, they work directly for you – not the insurance companies.

Insurance brokers and insurance consultants perform similar functions, are licensed, and have a fiduciary duty to you as the insurance buyer. Moreover, an independent, fee-only advisor is legally bound to be a fiduciary.

The fiduciary duty between an insurance broker and a client is based on trust and good faith, and requires that they act in your interest as a client. A “standard of care” is established between these two parties and it must be upheld, regardless of external interests.

Their duty ensures that brokers advise and work for you when purchasing coverage, not beholden to a particular insurance company.

The distinction between fiduciary responsibility for an agent compared to a broker, however, becomes blurred when agents are working for insurance carriers to sell their products.

An independent or captive insurance agent is primarily a representative of the insurance companies they work for. As far as fiduciary duty goes, liability typically falls to the insurer if the representative is determined to be an agent. This means the agent will not have a fiduciary duty to the insured.

Brokers, meanwhile, owe their allegiance to the client, even though they are typically paid by carriers. In other words, they are an agent for your company and owe fiduciary duty to you as the insurance purchaser.

As we discussed earlier, most brokers are compensated by commissions, which could present an inherent conflict of interest. In the case of conflicting interests, brokers and agents are supposed to disclose the "dual agency" or risk being accused of neglecting their fiduciary responsibility.

You should be able to trust that your broker is finding appropriate coverage for your company. If they are not attentive, do not provide valuable advice, or only appear when renewals are coming up, it may be time to browse other options.

Broker relationships do change. If you are unsatisfied, know that more than 40% of businesses do not feel satisfied with their current broker, and 21% have changed brokers in the past three years, according to Zywave.

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When evaluating and choosing insurance brokers, be sure to explore benchmarking studies that give you an understanding of who is out there and how much you should pay. Mployer Advisor’s proprietary M-Score can show you how different brokers rate in terms of industry expertise, transparency and cost.Looking for more exclusive content? Check out what’s trending on the Mployer Advisor blog.

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The past year has made many businesses worry that they will become the next to be impacted by bouts of civil unrest, riots or looting. You might be wondering if insurance will cover the damages that could occur at your properties.

Fortunately, most standard commercial insurance policies cover the cost of damage associated with riots and looting. Property damage caused by civil commotion and vandalism is generally covered under many business insurance policies.

This would include damage caused by rioters as well as business interruption caused by police and civil authorities during such an incident. Of course, coverage varies depending on your policies and your carrier.

In this post, we discuss which businesses need coverage for civil disorders and which types of business insurance cover riots and looting.

What Businesses Need Coverage for Civil Disorders?

The limitations of insurance and the process of reestablishing operations became major hardships for many brick-and-mortar businesses in 2020. Civil disturbances can pose significant risks for many companies, but business owners can protect their assets with the right insurance coverage.

Businesses with property in urban areas are especially susceptible to losses due to riots, civil unrest or vandalism. A small business in an area that has seen rioting and looting faces not only rebuilding costs, but also a wait for customers to return.

Restaurants, too, could have specific risks inherent to their business property that require them to purchase individual coverages for riots and looting. Some policies cover inventory separately, and some businesses like jewelers or art galleries carry specialty policies that have specific limitations.

Small businesses need coverage for civil disorders when there is a potential for rioters or vandals to cause physical damage to your building or property. People may break into your location and loot property, including your inventory or merchandise. You may lose income if people damage your property and you cannot operate regularly until repairs are finished. You lose income if a civil authority closes access to the area where you do business.

Luckily, if your business is damaged from arson, violence, vandalism or burglary, a standard commercial insurance policy will help cover the costs. Which damages an insurer will cover – and how much of it – depends on your insurance plan and your management of claims.

The best way to prepare is to contact your broker, agent or insurance provider to understand exactly what your policy covers if your business suffers due to riots and looting. Make sure to ask for specific details, including the type of damages covered, how much you would be compensated, and how to file a claim properly if this occurs.

What Types of Insurance Cover Riots and Looting?

Businesses most commonly have general liability insurance, property insurance, and workers’ compensation insurance. Most of these standard business insurance policies will cover damages in the event of riots and looting. But different types of insurance and policies may protect you in different ways.

Here are types of insurance that cover riots and looting:

• Property Insurance: Commercial property insurance covers physical damage resulting from vandalism, rioting and civil unrest. These policies are typically used for damage to a business' doors, lighting, windows and contents, such as furniture, office supplies and machinery. Commercial property insurance also usually covers the cost of boarding up broken windows and securing the location from further damage. However, a policy that does not offer “replacement cost” might not reimburse the entire amount needed to restock and rebuild.

• Business Interruption Insurance: Part of commercial property insurance and most business owner’s policies (BOPs), business interruption insurance (also called business income insurance) will help cover income that you lose if you need to adjust hours or temporarily close. This coverage typically is triggered only if the business’s premises are physically damaged. Business income coverage includes both net income and the cost of continuing normal operations. Note: Business income coverage is usually subject to a 72-hour waiting period.

• Workers’ Compensation Insurance: If your employees are injured on the job during an act of rioting or vandalism, a workers' compensation policy can cover their medical care. It could also compensate them for time taken off to recover or while your business is shut down.

• Business Owner’s Policy: Most business owner's policies (BOPs), which combine general liability, property and business interruption coverage, will cover damages to your physical commercial property and its contents in such an event. This typically includes damage to exteriors, doors, lighting, windows and interior damage, along with broken or stolen contents such as computers, machinery, furniture and office supplies. Businesses using a BOP can often opt-in for additional coverage for criminal activity, spoilage of inventory, and other incidents.

• Commercial Auto Insurance: If your company’s vehicles are damaged or destroyed, a commercial auto insurance policy can cover costs for most of these damages. Riot-related or vandal-related damage to vehicles, whether owned by the business or employees, is covered under the optional comprehensive portion of these business auto insurance policies. Comprehensive coverage typically also covers broken windshields.

How to Use Coverage for Riots and Looting

Here are some tips on how to use coverage and file claims for damages related to civil unrest, riots and looting:

• Read your policy: BOPs, property insurance and business interruption insurance vary, so it is vital to speak with your agent, broker or insurer to understand your coverages and liabilities.
• Report claims quickly: Policyholders should report claims to their insurer as soon as possible – whether directly or through your broker – so the claims process can begin. Generally, policies require that claims related to criminal behavior also be reported to law enforcement.
• Document the damage: Take photos and videos of the damaged property, especially if it must be discarded, so insurance adjusters can look at the evidence. Keep receipts for expenses from temporary repairs that allow you to restore operations or protect your property from further damage.
• Prevent further damage: When safe, businesses should secure the property against further loss by boarding up shattered windows and securing inventory. Costs for securing property against further loss is usually covered by business insurance policies. However, you should not make permanent repairs to your business locations until an insurance adjuster has inspected the damage.

After speaking with your broker or carrier and finding out what your policies cover, you may want to pick up additional commercial coverage that protects your business and your employees. Every business should find a reputable broker or agent that specializes in commercial insurance to find out which policies best protect you in the unfortunate event of civil commotion, riots and looting.Looking for more exclusive content? Check out what’s trending on the Mployer Advisor blog, and learn more about insurance brokers here.

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Every year, open enrollment allows employees to elect or change benefit options available through their employer, including healthcare benefits, life insurance, disability benefits, and other voluntary or employee-paid benefits. But the opportunity comes just once a year, so many employers wonder if employees have options after missing the deadline.

Typically, employers do not offer health insurance after open enrollment unless the employee has a qualifying life event that allows for a special enrollment period.

For employer-sponsored group health plans, the open enrollment period varies. The window of time for your employees to make health insurance decisions may differ depending on your corporate calendar, your insurance broker, and your health insurance provider.

In this post, we discuss an employer’s role in health insurance enrollment, whether employers can offer insurance after open enrollment, and what leads to special enrollment periods.

What Is Open Enrollment?

Businesses with 50-plus employees that offer health benefits must hold an open enrollment period, according to the ACA. And most small employers also offer an open enrollment period.

Open enrollment is an annual window of time where employees can enroll in, change or cancel employee benefits elections.

During open enrollment, employees can view and make annual elections for insurance and benefit plans that your business offers, such as health, vision, dental, life, and disability insurance plans. They can also make election and amount changes to health savings account (HSA) and flexible spending account (FSA) plans.

These changes could include switching health insurance plans, dropping certain types of coverage, adding dependents, or enrolling in benefits for the first time. Importantly, open enrollment allows your employees to consider the different available health plans you make available, with varying premiums, deductibles, copays, and coverage limits.

Premium rates are reassessed at the renewal date and then reflected in open enrollment as well, with health plan options and prices often changing for the coming benefit year. You can work with your insurance broker or benefits provider to find better and budget-friendly plans, or you can keep the plans you have. In addition, a broker will assist you with setting the appropriate employee premium contribution level.

Before and during enrollment, human resources teams should make sure employees know how much they will contribute to their plan each pay period. And, employees should be well aware of out-of-pocket expenses they may need to pay for healthcare. Your insurance broker or benefits provider can help determine what your employees need to know and educate them on health insurance options.

Open enrollment occurs once per year and typically lasts for a few weeks. Most businesses schedule open enrollment to end a few weeks before they must submit benefits forms to carriers. For calendar-year benefit plans starting Jan. 1, employers tend to hold open enrollment 30-60 days before the new year.

Can an Employer Pick When Open Enrollment Occurs?

Open enrollment for the ACA marketplace happens near the end of the year, but employer-sponsored plans can have different plan year dates and enrollment periods.

The period usually occurs in the fall, but employers have the flexibility so it does not necessarily have to correspond with ACA enrollment or the calendar year.

Open enrollment is also not required to be a certain length of time. However, most small employers have two- to four-week enrollment periods about one to three months prior to policy renewal. Coverage begins at a specified date after open enrollment and usually runs for a full year.

For the best service from your broker or insurance agent, you may want to plan your open enrollment period off-peak. For example, you could hold open enrollment in the spring for health insurance coverage that runs from July 1 to June 30 next year. In addition, you will need to decide if the enrollment will be active or passive. An active enrollment is one where the employee must make a selection for each type of coverage versus passive includes a no change option.

Typically, this open enrollment period is the only time employees can enroll in health benefits or change their coverage.

Can Employers Offer Health Insurance After Enrollment?

If an employee misses your company's health insurance open enrollment period and has not carried over their previous plan, they may not be able to do so until the following year.

Typically, employers cannot offer health insurance to employees outside of open enrollment. Once the business’s open enrollment window closes, employees usually have to wait a year to enroll or make changes.

If an employee is covered under another plan, but that coverage is lost, they can enroll in your plan immediately. Generally, employees have 30 days after they lose the other coverage.

If an employee has a qualifying life event, it could trigger a special enrollment period (SEP) for them.

Depending on the size of your business and how many employees are covered, you could be subject to ACA fines if your workers miss the open enrollment deadline. In addition, prior to ACA,  IRS Section 125 requires an annual election for benefits that include pretax deductions. Missing this deadline means your employees could be unable to acquire employer-run health insurance for a year, unless they sign a waiver stating they are covered under another plan, such as Medicaid. Exceptions are–for the most part–prohibited by the terms of the health insurance agreement. Companies typically have mandatory enrollment, even if it includes an employee declining coverage.

However, there are a few exceptions.

• Most carriers allow a 30-day “grace period” after open enrollment to update selections.
• If an employee is covered under another plan, but that coverage is lost, they can enroll in your plan immediately. Generally, employees have 30 days after they lose the other coverage.
• Employees can enroll in your healthcare insurance plan when they are hired.
• If an employee has a qualifying life event, it could trigger a special enrollment period (SEP) for them.

What Are the Factors That Cause Special Enrollment Periods?

Under specific life-changing circumstances, employees can enroll or change their benefits or insurance plans outside of open enrollment.

If an employee has a qualifying life event, they can be given more time to add, remove or cancel coverage through a special enrollment period. A special enrollment period is a window (usually 60 days) during which you can enroll in health insurance plans, even if it falls outside your company’s open enrollment period.

There are three main categories of qualifying events:

• Loss of health coverage
• Changes in household

• Changes in residence

Loss of health coverage is a qualifying life event and can warrant a special enrollment period. Examples include losing existing health insurance coverage, losing Medicaid eligibility, or expiring COBRA coverage.

Qualifying life events involving changes in household and residence include (but are not limited to):

• Getting married.
• Having or adopting a child.
• Aging out of a parent’s health insurance plan.
• A student moving to attend school.
• Permanently moving somewhere with different insurance options.
• Change household status that changes eligibility for tax credits.
• A seasonal worker moving back from their place of work.

During special enrollment periods, employees generally have the same options as they would during open enrollment. If nothing triggers a special enrollment period, employees usually have to wait until the next open enrollment period to sign up for health insurance.

Working with a qualified insurance broker can help walk you through open enrollment to make sure nobody falls through the gaps or misses an enrollment opportunity.

Looking for more exclusive content? Check out the latest on the Mployer Advisor blog, or read on for an explainer on the benefits of diversity in the workplace.

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Small businesses have many options to consider for health insurance benefits, including their impact on business taxes. Plenty of business expenses are eligible for tax write-offs, so many employers wonder whether health insurance premiums can be deducted.

Fortunately, small businesses can deduct most of their health insurance premiums and other expenses from their federal business taxes.

There are several ways employers might be able to write off health insurance-related expenses or deduct them from your year-end taxes.

In this post, we explore how employers can take advantage of tax benefits for various health insurance scenarios, including HSAs, tax credits, and deducting premiums.

How Can Small Businesses Deduct Health Insurance Premiums?

All small employers need to report the value of employees’ health insurance coverage on their W-2 tax form. This way, the government can incentivize companies to provide qualified health plans by offering ways to lower taxes.

The contributions made to employees’ small group health insurance benefits are tax-exempt. That means health insurance premiums paid by an employer are not subject to income or other taxes.

The amount that a company spends offering group health insurance for employees (or making contributions to their healthcare costs) can usually be fully deducted as a business expense. So, the amount you pay toward employee healthcare premiums is usually tax deductible. The contributions you make to employees’ premiums are considered a business expense by the IRS, giving you the ability to write off that cost.

To use this deduction, employers typically must pay at least half of their full-time equivalent employees’ premiums. You should consider all employees who perform services during the tax year when determining your number of full-time equivalent employees, and calculate the average annual salaries and premiums paid. You are not required to make payments toward dependent premiums to receive a tax deduction.

In many cases, you can also set aside tax-advantaged dollars for employees to buy coverage on their own. Qualifying small businesses can fund special health reimbursement accounts for employees that are used to purchase individual or family health insurance. Meanwhile, employees’ own contributions toward their monthly premiums can often be deducted from their payroll on a pre-tax basis. Some states have additional rules and restrictions.

HSA and HRA Tax Advantages

Similarly to health insurance premiums, Health Savings Account (HSA) contributions are not subject to Social Security, Medicare or federal income taxes. Earnings in an HSA are generally tax-exempt, and contributions can be excluded from an employee's income.

Contributions to employee HSAs are also deductible business expenses, if the money is used to pay for qualified medical expenses. So, if HSAs are part of your group health insurance plan, contributions from both your business and your employees are typically tax deductible up to annual limits.

The annual limit on HSA contributions depends on your type of health plan (e.g. High Deductible Health Plan), your age and your eligibility.

These tax advantages can be used in several ways. For example, employees can make pre-tax contributions to HSAs or to premiums for group health insurance.

Health Reimbursement Arrangements (HRA) are tax-advantaged, employer-funded healthcare accounts that are tax-deductible for your business, and Federal Insurance Contributions Act payroll taxes do not apply. For employees, HRA reimbursements are completely tax-free and excluded from their gross income.

SHOP and the Small Business Health Care Tax Credit

Small businesses also have access to provisions under the ACA that include the ability to purchase health insurance through the Small Business Health Options Program (SHOP) and access to the Small Business Health Care Tax Credit.

For information about state-based SHOPs participating in the insurance-buying process, see the Centers for Medicare & Medicaid Services FAQs about flexibilities for state-based SHOP direct enrollment.

Small business healthcare tax credits are widely available for small employers that provide employees with affordable health insurance coverage. To be eligible for the Small Business Health Care Tax Credit, companies must:

• Have fewer than 25 full-time equivalent employees and pay average wages under $53,000 per year.
• Offer a qualified group health insurance policy through the SHOP Marketplace.

• Pay at least 50% of the healthcare plan’s premium cost for each employee.

Qualifying employers may receive up to 50% of the contribution made toward employee premium costs as a credit. Businesses do not need to offer coverage to part-time employees in order to be eligible, but these employees may count toward full-time equivalent employee totals.

The tax credit is available to eligible employers for two consecutive years, with a maximum of:

• 50% of premiums paid for small business employers
• 35% of premiums paid for small tax-exempt employers

The tax break for your business works on a sliding scale, with larger credits for smaller employers.

For calculating the healthcare tax credit, one full-time equivalent employee equals 2,080 hours per year, according to the IRS. This differs from other ACA provisions that count 30 hours per week as full-time employment.

As an added bonus, even if your business does not owe taxes in a particular year, you can carry the credit back or forward to other tax years. Plus, the payment for health insurance premiums would exceed the total tax credit, meaning eligible small businesses could still claim a business expense deduction for the remainder of premium costs. That would lead to both a credit and a deduction for employee premium payments for the year.

Note: A self-employed individual can deduct many healthcare-related insurance premiums for themself, a spouse and dependents if they are not eligible to get insurance through an employer or a spouse's employer. The policy can use the name of the individual or the name of the business.

Smart businesses have good insurance and benefits. The best way to find good insurance and benefits is through a broker, consultant, or advisor who knows what you need and can get you the best tax advantage solutions. Especially with HSAs and HRAs.

Always check current tax rules and your specific situation with both your broker and your CPA.  

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