Insurance 101: What Are Voluntary Benefit Plans?
Published On: March 17, 2021
Few things are more important than keeping your employees healthy and happy. But when it comes to offering benefits that protect them, businesses often wonder how to navigate the landscape of voluntary benefit plans.
Voluntary benefits, otherwise known as supplemental insurance, are benefits offered by companies that are voluntary for employees to use and typically paid for by employees via payroll deductions.
These types of benefits are usually offered in addition to required insurance types and other core benefits provided by the employer. Voluntary benefits can include life insurance, dental insurance, accident insurance, legal insurance, and disability income, to name a few.
There is a wide range of in-demand voluntary benefit options that employers can add to their benefit plans at little or no cost to them.
In this post, we discuss the types of voluntary benefit plans you can offer to your employees and what you should consider when drafting and buying voluntary benefits.
Should I Offer Voluntary Benefits to My Employees?
There are dozens of insurance types beyond liability and healthcare that may be suitable for a voluntary benefit plan.
You should offer voluntary benefits to your employees if you want to provide a wider range of benefit choices to attract and retain top talent. When employees feel secure, they are more likely to feel satisfied and engaged at work.
Voluntary benefits allow employees to choose which benefits they value the most and customize insurance packages for their needs. Your workers are given the power to decide which types of supplemental benefits are best for them and their families.
These benefits can act as supplements to existing benefits. For example, if you offer standard accident insurance policies, a voluntary benefit would allow the employee to pay for upgraded coverage.
Payment via payroll deductions is obviously convenient for employees. Moreover, with these benefit options, the employees get not only convenience, but also better prices for insurance they may want to purchase anyway. One of the main attractions of voluntary benefits is that they offer group insurance rates to individual employees, which they likely would not be able to get on their own.
Because they are funded by payroll deductions, voluntary benefits improve the benefit package you offer your employees without significantly increasing costs to your business. Employees receive not only the benefit of more affordable group rates, but also typically pay for them with pre-tax dollars. This increases their likelihood to opt for additional coverage.
Even small businesses can benefit; often It usually does not take too many employees to get a group discount, so even small businesses can take advantage of voluntary benefits.
Drafting a Voluntary Benefits Plan
Planning to draft a voluntary benefits plan? Your step should be to survey your employees' needs. This will help you decide which types of benefits would be most valuable to the team, so you can focus on exploring those options first.
It is just as important, while you plan, to inform your employees about the payments and tax savings that come with supplemental insurance. As an employer, you choose which benefits are available and at what coverage levels, giving employees more flexibility than an individual plan would.
When drafting your plan, make sure to integrate voluntary benefits as much as possible with employer-paid core benefit offerings. For example, a company offering baseline short-term disability coverage could enhance it with a voluntary, employee-paid layer of long-term disability benefits.
The most common voluntary insurance types complement your healthcare offerings and provide financial security for employees if they become sick or are injured. However, businesses should tailor their voluntary benefit options based on employee demographics such as age, income level and marital status.
Compare different insurance carriers to check requirements for the number of employees at your company, available benefits, costs, potential savings for your company and existing employee education on the benefits.
This is where a benefits broker can be extremely helpful. They can identify the voluntary benefits that your employee population really needs and make sure your employees are well-positioned to take advantage of them.
Purchasing Voluntary Benefits
For the most part, you can offer voluntary benefits at no direct cost to your company, leaving you with just the cost of administration. And, perhaps more importantly, you do not need hundreds of employees to offer them. Some voluntary benefit plans require a minimum of two to five employees, while others have no minimum requirement.
Payment options are typically flexible. Voluntary employee benefits can be partially or fully funded by employers, if you choose to go that route. It depends on how much control you want to give employees over how much they want to spend and what options they want to add.
Another important note: offering group insurance typically means lower premium costs per individual. So, the employees signing up for these plans will most likely save money compared to buying them individually. As an additional bonus, employee contributions may be treated as pre- or post-tax, depending on the type of benefit.
If your company offers a voluntary benefits package, you may be able to reduce your core benefits package to save money while offering personal insurance benefits at a reduced group price. In this way, small businesses can compete with larger enterprises that receive large discounts on standard insurance and benefits policies.
Regardless of the types of benefits you need, the best way to figure out how to buy voluntary benefits is to speak with a qualified benefits broker. A good broker can help you determine which voluntary benefits packages will work best for your business and for your employees. Looking for more exclusive content? Check out what’s trending on the Mployer Advisor blog, and be sure to check out our By the Numbers series.
Director of Content, Mployer Advisor