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There is a lot of confusion surrounding whether or not employee benefits can be taken away from employees without their consent and/or knowledge. To ensure you are as knowledgeable about this topic as possible, here we answer some commonly asked questions concerning the ability of an employer to take away employee benefit plans.
Simply put, the answer to this question is both yes and no. As an employer, you are not legally able to remove benefits without the employee having some previous knowledge. There are a few different laws and regulations that regulate how employers can cut benefits without informing their employees, as a way to protect employee’s rights. Typically this includes plenty of notice with a legal explanation such as financial problems.
It is important to understand that some employee benefits are not just perks that inspire your employees to show up to work. Instead, they are a form of contractual compensation that goes hand in hand with their salary, meaning as an employer, you are not able to take away your access to them without some sort of warning. A contract of employment was signed by both of you before the employee’s first day, and it must be followed. Generally speaking, the benefits that employees are entitled to by law include social security, unemployment insurance, family medical leave, and worker’s compensation insurance. So this means that as an employer, you must allow for unpaid family leave if the employee qualifies under FMLA, you must pay unemployment insurance if you terminate the employee, and if the employee is injured on the job, the employer must cover your worker’s compensation.
Additionally, employers are required to withhold state and federal income taxes from an employee’s paycheck, as well as paying a matching amount to Social Security and Medicare tax. If this is not done, any employer can be held liable by the Internal Revenue Service.
All employees are guaranteed the above benefits by law. If an employer removes them, they are liable to legal action.
It can come as a surprise that many benefits are not mandated to be provided by the employer. For example, this means the employer is not legally obligated to provide vacation days and paid time off, retirement savings accounts, life insurance policies, and/or any other perk you may think of. While these benefits tend to be attractive when it comes to attracting top talent to the business, employers can eliminate them for business purposes at any time as there is no legal requirement for these benefits.
Some larger companies offer the ability for their employee to join a union, which is meant to help protect employees from certain harmful actions from their employers, including the elimination of benefits. Usually, those in a union have a legal contract set up with the employer that distinctly lists out each benefit they will offer, and the employer is legally responsible to fulfill it.
No, it is illegal for any employer to take away benefits based on an employee’s age, race, gender, and/or sexual preference, to name a few examples. Doing so would be discrimination.
However, there is an important distinction to make here when it comes to providing different pay rates to different employees based on seniority and/or job function. Employers are allowed to make specific changes to different bands of employees, meaning employees that are full-time compared to those that are part-time or those that are senior managers to entry-level employees. This means different “classes” of employees may have different benefits packages, but employers cannot apply different benefit rules to some employees over others.
The short answer is no. Again, this is where the employment contract comes into play. This is a legal contract that listed out an agreed-upon wage statement, and a change of compensation without consent would be a breach of contract.
With this in mind, the word “consent” can be confusing. Each state has different laws on how much an employer can change wages while still being within the scope of the contract. Generally, this can range from a 5% to a 15% change, depending on your location. But despite this, as an employer, you still need to provide a brand new employee compensation contract if wages increase or decrease.
The answer to this question is maybe. If the bonus is discretionary, your employer may choose to offer it to you for any reason or no reason at all. These bonuses are often presented as gifts around the holidays or are dependent upon company performance. In most cases, if your employer decides to lower or take away a discretionary bonus, you have no legal recourse.
The alternative is non-discretionary bonuses which are based on specific criteria and are legally guaranteed. If this is the case, you may be able to file a claim against your employer for contract violation or failure to pay wages. It is also important to notice if the employee's pay is less than the minimum wage without the bonus.
Bonuses should not be advertised as a specific, guaranteed compensation rate.
Any employer should offer an ample benefits package to their employees, not only to attract top-quality candidates but to retain fantastic employees to your teams for years to come.
Are you curious what employers like you are offering their employees? Download our benefits benchmark report, Mployer Insights to see how your benefits plan stacks up. Looking for more exclusive content? Check out what’s trending on theMployer Advisor blog.
The ability to attract and retain top quality talent has increasingly become a major priority among employers operating in an increasingly competitive labor market, and few tools have proven more effective at properly incentivizing current and prospective employees than robust benefits packages which can set a company apart from the competition.
When redesigning and attempting to improve benefits offerings, however, many companies tend to focus their attention almost exclusively on medical benefits, which is understandable given that medical benefits are the largest benefits-related cost component from an employer standpoint.
What many employers fail to recognize, however, is that employees rank financial benefits like 401k contributions and incentives nearly as high as medical benefits in terms of how attractive those kind of benefits package components are from an employee perspective.
In order to create a truly employee-centric offering that is optimized to attract the ideal candidates from the labor pool, a company must evaluate all the potential components of a benefits package, including:
Of course, no benefits package regardless of its components can be fairly evaluated in a vacuum. In order to understand how best to craft the optimal benefits package for a given company, that benefits package must be compared with the benefits packages being offered by other similarly situated companies who are competing to attract the same talent.
This is where employee benefits benchmarking reports comes into play and have become an essential process for competitive companies to undertake.
Benchmarking in its simplest form is the exercise of comparing one company to another. In our case, we’re interested in comparing the benefits packages offered to employees by different employers, but the principle is the same whether comparing companies’ products and services or informal perks.
The key input that makes benchmarking possible is comp. data. Of course, any given company should have up-to-date information about its own benefits packages readily available, but gathering comparable information about the business and practices of competitors is typically a much more difficult task.
Further, not only can it be difficult to gather data in general, but it can be especially tricky to gather relevant data, that is, data from companies that are in the same industry and of a similar size. Even factors like geography can have significant impacts on benchmarking data, so it is extremely important that the data being used is well-tailored to the company/industry/location in question in order for the benchmarking comparison to provide meaningful, actionable results.
It’s also very important that the data is unbiased, which can be sometimes be difficult to determine given the often-misaligned financial incentives of data collectors and providers, which reinforces that properly assessing the source and quality of the data is a critical step in the benchmarking process.
There is no shortage of benefit benchmarking data available, which can be both a good and a bad thing. Having a lot of data available is great in the sense that there is a wealth of information from which valuable insights can be gleaned, but one of the reasons that there is so much data in the first place is because it is being supplied by a huge number of sources with inconsistent reporting, methodology, motivations & target audiences, differing definitions, data sources, samples & time frames, etc.
With that caveat in mind, for Small Business Benefit Benchmarking data, Zenefits produces a great survey focused on health benefits that is excellent for understanding small business trends in medical and plan design. It should be noted, however, that Zenefits is an insurance broker, which is primarily how they monetize their platform, and the sample set in the data is Zenefits own users who may or may not share similar characteristics with your company.
For information about Insurance Broker Benchmarking, Mercer Data is a great resource targeting companies that employ 500+ employees and encompassing in depth plan design, planning, discussion and consulting.For Payer Benchmarking, it is typically larger carriers who produce segment specific reports. Alfac and Cigna have historically put out great voluntary and health information respectively, for example. Because that information is siloed and apart from any comparable data covering other benefits package components, however, it is difficult to use this data to draw conclusions and take actions in a cohesive way across a full benefit plan design and offering.
There is also a fair amount of Benchmarking Data from Enrollment Firms, which is typically pulled directly from the firms’ clientele and their plan choices. The quality and applicability of this data can vary widely from firm to firm, any one of which may specialize in certain types of companies or industries and/or may exclusively operate in one or more geographic areas with particular characteristics.
As alluded in the paragraphs above and through much of our exploration of the available benchmarking data resources generally, sourcing relevant and unbiased information were two of the main challenges to effective benchmarking that we continually encountered over and over again.
In terms of bias, it is important to be aware at the outset of the process that nearly all benchmarking information today is provided by someone with a financial interest in your company choosing one plan over another.
To be clear, this isn’t to say that the data has been manipulated or framed to be deliberately misleading, but strong financial incentives can have practical effects even if they aren’t being actively considered or even acknowledged. This situation is not unlike a scorekeeper for a basketball game also playing for the opposing team. The arrangement itself is not evidence of any wrongdoing or malicious intent, but it certainly should raise questions and it serves to highlight the fact that there is no independent resource to fill this needed role.
Beyond bias, there are also issues involving the relevancy of benchmarking data, which typically involve data that is incomplete, over-broad, and/or non-actionable:
It’s also very important that companies recognize that while the technical, data-based issues of relevancy and bias are certainly considerable hurdles to overcome when evaluating benefit offerings, the far greater issue that most companies face is less a technical problem than a problem of perception and communication.
After all, even the best imaginable benchmarking dataset is of little value in terms of attracting and retaining quality employees if an employer is unable to effectively communicate the value of their benefit offerings in a way that is compelling to the specific prospective or current employees in question.
Consider this example provided by a fellow MployerAdvisor staff member:
I have a great friend whose company covers 100% of medical for all employees. She is evaluating taking a job with a 12% raise but has to pay for medical. At the end of the day, is that a pay raise? She doesn’t value the benefits being offered to her, but it’s not her fault. Her company is not able to communicate to her the value of the benefits and much less how that compares to the market.
In the example above, the employer does all the hard work and is offering a significant benefit but has failed to communicate the value they are providing and therefore the positive impact of that work in terms of employee retention is lost altogether.
It should also be noted that employees’ expectations and their impression of any given benefits package component can be significantly influenced not only by the information being provided (or not) by the employer but also information from outside sources can have a major impact as well. In a sense, employees sometimes undertake their own approximated benchmarking effort through social circles and their industry network, though the limited sample regularly leads to a skewed perception of where their benefits package may actually fall on the market spectrum.
Regardless of the reasons why employees may not fully appreciate the value of some benefits offerings, the most important takeaway is that in order for benefits packages to have their intended effect in terms of talent attraction and retention, those benefits must not only provide real value to current and prospective employees but that value must also be effectively conveyed so that it can be internalized and comprehended by the recipients on a practical level.
Given our encounters with the shortcomings of publicly available benefits benchmarking data, and given our data processing capabilities and our uniquely independent positioning in the industry, Mployer Advisor recognized that we have the opportunity to address the bias, relevancy, and communication issues hampering the industry by launching our own, independent benchmarking platform and accompanying resources.
Mployer Advisor was founded to address inefficiencies in the insurance and brokerage marketplace and to support both employers and advisors with better information leading to better outcomes for everyone involved. Because our company generates revenue exclusively through advertising on our platform, which is an opportunity we offer exclusively to highly-rated insurance advisors, there are no concerns about any conflicts of interest in our data.
And relevancy is no issue since our benchmarking information is tailored for you down to the company size, geography and industry, and your custom snapshot is updated annually with information pulled from the largest benefit design database in the US processed through industry-first statistical modeling to provide the most granular, micro-targeted assessment the industry has ever had access to.
As with everything we do at Mployer Advisor, our goal in offering benchmarking and analytics information is simply to improve the employee benefit and insurance industries. We believe that better information and greater transparency lead to increased efficiency which leads to improved performance and more business.Click here to download your customized benchmark report.
Insurance coverage can provide a vital safety net for employees in businesses of all sizes. Because extra benefits and insurance options can significantly contribute to employee happiness and their dedication to the company, it’s in every business’s best interest to understand what supplemental coverage their employees desire. Spousal life insurance is a common type of this additional insurance. By providing your employees with the option to obtain a financial safety net in the event of sudden and unexpected death, you are showing them that you care about their needs.
Let’s take a closer look at the details surrounding spousal group life insurance.
Spouse life insurance is a form of dependent life insurance and can be defined simply as group life insurance coverage that is purchased for a partner or spouse. Beneficiaries are named to receive a payout, known as a death benefit, in the event of a loved one’s untimely death. The goal of the death benefit is to ensure that surviving family members are not left with overwhelming financial burdens such as mortgage payments, funeral costs, and cost of living. This is a specific benefit meant just for the spouse, but not other beneficiaries such as children.
When an employee makes an annual election for coverage, they will also be able to make an election to cover their Spouse. This option is usually in flat dollar amounts. $15,000 to $150,000 of Group Term Spousal Life Insurance Coverage. Size of the group and the age gender mix of the group will determine the maximum amount of coverage made available.
Because life insurance results in a significant payout should the policyholder pass away, insurers need to take a number of factors into consideration when determining the cost of an individual’s monthly payment. This essentially equates to the amount of risk a buyer presents.
Typically, because group insurance risk is spread out among the whole group and levels of coverage are determined at a guaranteed issue level, there usually is not health information required.
However; the insurance company does consider the following factors when looking at a group life coverage census:
Much like health insurance, if spouse group life insurance is offered, it can only be purchased during open enrollment or after certain qualifying events that allow for special enrollment. Unlike health insurance, however, coverage may not begin immediately; for example, a policy that was purchased for your spouse during open enrollment (November 1st to December 15th) may not go into effect until January 1st.
If spousal group life Insurance is not offered, the spouse can purchase individual life insurance through an insurance agent. In addition, voluntary individual employee pay and all payroll deducted coverage could also be considered. These are typically not considered group life plans. Both options are typically more in premium for the spouse than group term spousal life coverage.
Giving your employees the option of enrolling in spouse life insurance communicates that you understand their personal needs; because spouse life insurance can guarantee the protection of a household’s wellbeing should something sudden and unexpected occur, you will be providing an essential form of financial support. Whether you’re a benefits manager at a large corporation or a small business owner with a handful of employees, your workers will see your dedication to their livelihood and financial security. Are your competitors offering their employees spouse life insurance?
Download your custom benefits benchmark report to see which benefits employers within your industry, location and company size are offering their employees. 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.
Insurance brokers can help your business choose policies and coverage types that make the most sense for you. Their job is to help clients understand their liabilities and how those risks can be managed through proper insurance coverage.
Insurance brokers do not sell insurance, but they can find insurance companies and coverage policies that align with your business, and then negotiate with multiple insurers to find competitive rates.
To finalize and initiate a business insurance policy, you or your insurance broker will need an insurance agent working on behalf of the insurer to close the deal.
In this post, we explain the difference between insurance agents and brokers, who pays an insurance broker, and companies’ requirements for business insurance.
Insurance brokers help you review and shop insurance and benefits policies best suited for your needs and your budget.
The main difference between an insurance broker and an insurance agent is whom they represent. Insurance agents represent one or more insurance companies, but when you hire an insurance broker, they work directly for you not the insurer.
While independent agents work with more than one insurer, they have contracts with companies that often limit them to selling certain policies. Brokers, meanwhile, can solicit price quotes from multiple insurers. So, you can think of an insurance broker as an intermediary between insurers and businesses, with no stakeholder interest in the policy itself.
Importantly, you can't buy insurance from an insurance broker, but they can help you find the best policies and manage claims. Put another way, an insurance broker cannot complete the sale of a policy that right is reserved by the insurance agent or insurance company. Once a broker has done all of their research and presented their clients with options, the policy selected must be bound by an insurance agent or company.
Independent agents and brokers approach their work similarly, because they can offer several policy options from multiple insurers. Captive insurance agents, meanwhile, work on behalf of a single insurer, and brokers are not contracted with any insurers.
Regulations require each company with employees to have workers’ compensation insurance, and most states have additional requirements. These typically include policies such as general liability for lawsuits or business property insurance for workspaces and equipment.
In some cases, you are legally required to purchase certain types of business insurance. Since insurance companies may require state licensed insurance agents to sell their products, companies purchasing business insurance may be required to use insurance agents.
Some states do not recognize brokers and only license agents for insurance. With insurance being state regulated, each state handles brokers and agents all differently.
Many insurers rely on agents and brokers to distribute their business insurance products. They don't often sell policies directly to businesses, due to regulations and industry best practices. If you do not use a broker, you will most likely have an assigned agent at each company you contact.
To initiate policy coverage for a business, a broker or agent must obtain a binder signed by an underwriter or other representative of the insurer.
The type of license an agent or broker needs depends on the state and the type of insurance coverage required.
Good brokers and agents stay on top of legislation changes and tax reforms, making sure your policies are up to date. They can help ensure you are covered for unexpected legal and tax issues related to your insurance benefits.
An insurance broker makes money from commissions when your business buys and renews policies from insurance companies, along with any broker fees, if applicable. They may charge both commissions and fees, or only a commission.
Commissions are typically included in the price of the annual premium charged by insurers to policyholders. These could include base commissions and supplemental commissions, which are smaller, ongoing annual payments.
Most commissions fall between 2% and 8% of premiums, according to Investopedia.
Brokers may also be paid broker fees, which can be combined with a commission structure.
Broker fees are usually non-refundable, so your money will not be returned if you cancel your policy mid-term, unless your insurance broker was dishonest or broke your contract. Fees are generally paid directly to the broker, but in some cases are included in annual premiums.
You should know if your broker or agent charges fees, and what those fees are, before they start searching for insurance policies on your behalf.
Are you ready to find a top rated insurance broker that can find you a cost effective policy that best fits your needs? Search for a broker with Mployer Advisor’s online broker marketplace.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.
While brokers can save you time and money, they are compensated for their services. Not all brokers are made the same, and the commissions or fees they collect may be different.
Insurance brokers typically are compensated a commission fee based on a percentage of the policy premium. The commissions are usually paid by the insurance company, not the buyer.
In this post, we explain fees and commissions for insurance brokers, how they get paid, and how much you can expect to pay for brokerage services.
An insurance broker typically makes money from agreed-upon commissions when your company buys and renews policies from insurance companies.
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 already built into the retention component of the premium cost.
Payments to your insurance broker could include both base commissions and supplemental or override commissions.
Most commissions fall between 2% and 8% of premiums, according to Investopedia.
Negotiating fees and commissions for your business insurance broker may be possible, and is dependent on the size of your company along with the internal incentive policies of your insurance provider.
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. Your policy could also contain a "short-rate cancellation fee," by which you would owe your insurance company money for cancelling your policy midterm. It is important to know the terms of your agreement.
Insurance brokers do not sell insurance, but they can find insurance companies and coverage policies that align with your business. To finalize and initiate a business insurance policy, your broker will need an insurance agent or insurance carrier.
Some brokers are paid solely through commissions for policy purchases and renewals, and some include other fees. Some states have restrictions on these non-commission payments but broker fees rarely eclipse more than 15% of the premium.
Broker fees can be combined with a commission structure, and should be disclosed to you upfront.
Sometimes, brokers will charge fees as they take on consultant (or advisor) roles, providing ongoing services to help determine if policies should change, assist you with compliance, and help submit claims and receive benefits. You should know if your broker or agent charges fees, and what those fees are, before they start searching for insurance policies on your behalf.
The fee may be a similar amount to the commission they could have earned, and unlike commissions, it doesn't come from the insurer.
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. Again, it is important to know your contract fees and terms.
Even with commissions and fees, a good broker adds significant value.
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.
Brokers also rely on repeat and referral business, so they are financially motivated to choose coverage that your company will keep renewing for a long time. Insurance companies often offer incentives to brokers for policy renewals as well, so they should work in your best interests to find satisfactory insurance plans.
On the other hand, since they are paid by commissions based on premium costs, brokers could be incentivized to add unnecessary coverages.
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.
There are very good professional brokers in your market. With that said, broker relationships do change. If you are not satisfied, 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.
In general, you can switch to any broker licensed in your state without additional fees. Plus, it is possible to switch insurance advisors without changing your current policy. Changing to more knowledgeable brokers or advisers could provide a more personalized plan with similar costs.
Insurance buyers should compare brokers and consultants based on professionalism, demonstrated knowledge in insurance, understanding of your industry, transparency and cost.
To avoid unexpected costs, you should know fees upfront, examine your broker’s relationship with insurers, and understand the difference between insurance brokers and insurance agents.
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. These include contingent and supplemental or override type commissions. Good brokers have no issue with transparency.
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, or read "Can an Insurance Broker Save My Company Money?" for more information on insurance brokers.
The first step toward determining what makes an insurance broker good is to define what it means to be a good insurance broker in the first place.
As with most qualitative assessments, what constitutes ‘good’ in this context may vary widely depending on one’s perspective. For example, from the perspective of insurance providers, a good broker might largely be defined as a great salesman who maximizes client satisfaction and retention while simultaneously minimizing claims paid out.
On the other hand, from the perspective of the company engaging a broker in order to procure commercial insurance coverage for their business and employees, the definition of what makes a broker good might be the polar opposite from the attributes and skills that the insurance provider is looking for in a good broker.
For our purposes here, the focus will remain on evaluating brokers from the perspective of the companies who are procuring insurance coverage. However, what makes for a good insurance broker can still vary considerably depending on a number of factors, including the size, market, preferences, and the specific insurance needs of any given business.
Many companies view insurance coverage as an expense to be minimized on their balance sheet, unrelated to the functioning operation of their core business. These particularly price-conscious insurance shoppers who prioritize low rates above any other consideration might define a good broker as the one who can get their company the best insurance deal possible.
Of course, how to define the ‘best’ deal requires some parsing out, as well, given the best deal in the short term may not be the best deal in the long term. Defining the ‘best deal’ would also depend upon a given company’s risk tolerance and what claims are ultimately made over the life of the policy, etc.
For the sake of simplification, however, let’s assume that ‘best deal’ means the lowest possible upfront rates for standard coverage.
Even with this simplified definition, however, merely finding the best rates may be trickier than anticipated. In some markets, for example, where businesses are seeking standard types of insurance protection with little to no company-specific customization required in their coverage plans - those companies may be surprised to find that they keep getting the same quotes from brokers representing the same payers with little price or coverage fluctuation.
In those circumstances, these standardized coverage options have become essentially commodified, which means finding a good insurance broker (or at least one that is relatively better than other available options) will require using other criteria by which to evaluate potential new insurance brokers.
On the opposite end of the spectrum from the broker who can quote the cheapest rates is the broker who can offer the most comprehensive coverage.
Of course, implicit in the notion of comprehensive coverage is that the coverage, while thorough, is tailored to suit the specific needs of your company and not superfluous or excessive in the operation of your business. Few would label a broker as ‘good’ simply because they sold you any and every type of insurance imaginable whether you needed it or not.
Therefore, the key to a good broker offering comprehensive coverage is the ability of that broker to accurately and specifically identify the needs of your business in order to shape an insurance coverage package that addresses all of your business’s areas of concern without going overboard into the unnecessary.
In this light, a good insurance broker might be one who is thoroughly versed in your industry. This could be either through direct experience or from comprehensively learning the space in order to provide the appropriate guidance to your company.How Can a New Insurance Broker Help My Business?
The other main idea implicit in the concept of comprehensive coverage is that you will in fact be covered and paid out for the events and incidents to which your company wished to limit its exposure. After all, what appears to be comprehensive coverage when crafting the policies initially may be of little value in situations when the insurance provider disputes that an event in question is actually covered.
Here, a good insurance broker might be defined by their ability to accurately anticipate and explain the scope of coverage so that there is no misunderstanding about when and how that coverage either will or won’t apply.
This definition of a good broker again harkens back to their experience or learned knowledge of your company’s industry and risk exposure. It also brings up a new consideration: the role of an insurance broker as an advocate for their clients, even when promoting a position adversarial to the position being taken by the payer in a given instance.
To be a good insurance broker in this regard is to put the client’s interests first and to champion their clients whether it be in seeking payment for claims, in making a case for reduced premium rates, and in any other cases where the interests of the clients and the providers may conflict.
For those companies interested in whether or not their current or potential broker meets this particular definition, it might be wise to simply ask for examples of when that broker has taken a position on behalf of their clients against the payer’s interest and gotten favorable results to their clients’ benefit.
Perhaps the most important attribute when defining a good insurance broker, and not coincidentally the only aspect listed that overlaps with an insurance provider’s definition of a good broker, is a broker that keeps their clients satisfied.
Presumably, client satisfaction is encompassed in all the good broker qualities discussed here thus far. For example, if a broker can’t get their clients a good rate quote, isn’t knowledgeable about their client's business, is therefore unable to tailor a comprehensive coverage package, and won’t be an effective advocate for their client's interest – then it’s unlikely that broker meets the threshold to be considered good in this context.
That said, beyond these previously discussed considerations, there are a number of other factors that brokers will likely have to meet in order to keep their clients satisfied. Managing communications comes to mind first and foremost, both in terms of regular communications under normal circumstances as well as communications in times of emergency when claims are being filed, which tend to be a regular occurrence in the insurance industry and require a greater sense of urgency.
Beyond the timing and effectiveness of communications, the tone of communications can be very important and speaks to other issues like culture, emotional intelligence, and the importance of building a productive working relationship between broker and client for maximum client satisfaction. This can be tricky when not all clients have the same expectations about the ideal form that such a relationship ought to take.
A good insurance broker will most likely get you a rate quote that you’re happy with, which may be fairly simple and commodified or relatively intricate and complex depending on your particular business.
A good broker will certainly be experienced in your field or at the very least eager to learn and independently research the area in order to make sure your coverage is appropriately comprehensive without making you pay for overkill coverage that you don’t really need.
Also, a good broker will certainly be a strong advocate on behalf of their clients whenever there is conflict with the insurance provider. Additionally, a good broker will keep their clients satisfied with their services through effective communication, culture, and relationship-building.
Most importantly, what you need is not a ‘good’ broker in the first place. What you need is an insurance broker that’s best for you.
There is no one-size-fits all definition of a good broker that will apply in any and all cases. With these ideas in mind, the best way to determine the broker that can best serve your company in administering your insurance needs is to first identify what aspects and attributes are most important to your company. Then, start narrowing your search by the criteria that you’ve chosen to prioritize by asking a lot of questions of as many brokers as you see fit.
To search for insurance brokers by geography, specialty, rating, provider affiliates, customer satisfaction or other relevant criteria you may have deemed to be important, search Mployer Advisor.
We help employers find top-rated insurance brokers for their needs. In addition to broker listings, Mployer Advisor showcases customer reviews and feedback to help employers compare and evaluate different brokers. Start your search today.Find Top-Rated Brokers Near You
At Mployer Advisor, our focus is creating transparency in the insurance and insurance broker, consultant and advisor space to the advantage of the employer. Analytics is our core and we will bring to light new information, tools and resources to aid employers in making more cost-effective decisions. As a phase I, we are here to help employers find the right broker or consultant and the right insurance company for them. Giving choice and initial transparency is a first step in creating an employer centric insurance marketplace.
It's no secret that healthcare costs have risen dramatically over the past several decades; in fact, according to the Kaiser Family Foundation (KFF) healthcare spending rose nearly a trillion dollars between 2009 to 2019 when adjusted for inflation.
In 2019, according to the KFF’s report estimates, healthcare spending in 2019 almost hit $3.8 billion–which comes out to about $11,582 per person. By 2028, these costs are expected to reach $6.2 trillion, or about $18,000 per person. For a closer look at the cost breakdown in healthcare spending in 2020, check out these handy charts from the American Medical Association.
With such excessive costs to contend with, employers nationwide are searching eagerly for ways to control costs without negatively affecting employees’ access to sound healthcare coverage. As such, more and more companies are choosing to set aside funds to pay for employees’ healthcare instead of offering a more traditional group healthcare plan.
When weighing the best plan and healthcare strategy for your workforce, savvy employers nationwide often investigate the differences between healthcare plans that are fully insured or self-funded.
A fully insured health plan is a more traditional route of insuring employees. Employers pay a fixed premium to a carrier that will cover the employees’ medical claims. Although they can be more expensive, employers can save money by providing exceptional service to keep them happy and healthy, which can serve as a powerful tool to attract and retain talent.
In fully insured health plans, employers pay a premium to the insurance carrier. The premium rates are annually fixed based on your enrolled employees in the plan each month and will only change if your number of employees changes. Employees are required to pay their deductibles or copays.
The main downside when choosing a fully insured health plan is that it stops you from customizing your health plan completely. However, this option does eliminate the administrative duties and expenses often associated with a self-insured health plan. The insurance carrier deals with the employee claims, resulting in lower risk for the employer too.
When selecting a self-funded health plan, also known as a self-insured health plan, the employer runs the health plan and assumes all the financial risk for providing benefits to employees. Self-funded plans are more flexible than fully insured plans because they give you the potential to design a healthcare plan that meets all employee needs; self-funded plans can also reduce the cost of premiums as a result.
However, if opting for a self-funded health plan, employers must calculate the fixed and variable costs for the plan. Costs can include administrative fees, stop-loss premiums, and other set fees. Additional costs include healthcare claim payouts that vary each month and are contingent on submissions from employees and dependents.
To mitigate the financial risk mentioned above from a self-insured health plan, employers can implement stop-loss or excess-loss insurance, which reimburses the holder for claims that exceed a set amount. This can be used to cover claims for one covered individual or cover claims that exceed the level for a group of covered employees.
Although self-funded plans can save employers money, self-funded plans require more planning and likely warrant a dedicated internal team to navigate the inherent complexities.
If you want to know more about which plan type is right for your business, the next step is to connect with a top-rated, experienced employee benefits broker.
Looking for more exclusive content? Listen to our latest episode of This Week in Benefits, and check out our By the Numbers blog series.
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Benefits packages are essential to the modern worker. No matter what industry your company is in, offering a robust retirement plan, an excellent paid time off policy, and extensive health coverage can provide comfort and security for your employees -- especially during a pandemic; however, these benefits incur additional costs that some businesses might not be able to manage or justify. Considering how vital and valuable benefits are to employees, is it possible for businesses to change or remove them without notice? Let’s take a closer look.
Prior to the establishment of the Affordable Care Act (ACA), businesses were not required to offer health insurance coverage to their workers. Now, providing health insurance coverage is mandated by law if you have 50 or more employees and has become standard practice if businesses want to attract and keep the best employees.
The Employee Retirement Income Security Act of 1974 (also known as ERISA) is a federal law that was enacted to protect individuals participating in most voluntarily established retirement and health plans in private industry. It performs four fundamental functions:
Changes to health insurance plans and benefits coverage are legally known as material reductions and refer to any plan modifications that would be considered by the average participant to be an important or significant change. According to the Employee Benefits Security Administration (EBSA) this includes any plan modification or change that:
...eliminates benefits payable under the plan; reduces benefits payable under the plan, including a reduction that occurs as a result of a change in formulas, methodologies, or schedules that serve as the basis for making benefit determinations; increases premiums, deductibles, coinsurance, copayments, or other amounts to be paid by a participant or beneficiary; reduces the service area covered by a health maintenance organization; establishes new conditions or requirements (e.g., preauthorization requirements) to obtaining services or benefits under the plan.
Under ERISA, employers are required to give 60 days’ notice prior to any material modification scheduled to take place. This includes informing workers of their right to purchase a temporary extension of group health coverage (like COBRA) if a qualifying event occurs. If material modifications, rather than reductions, are going into effect, employers have until no later than 210 days after the end of the plan year in which the change is adopted to inform employees.
Unfortunately, the world of insurance isn’t always easy to understand; whether you’re a small business owner who is simply trying to find a solution so you can get back to the actual work or a benefits manager who wants to make sure they choose the right coverage for their company’s needs, you might need support from an insurance broker to explain the nuances of business insurance and employee benefits, especially considering the potential legal and financial consequences surrounding any mistakes.
Certain pressing situations can force companies to alter or, more commonly, reduce their benefits plans and health insurance coverage out of financial necessity. Because most benefits packages are a combination of mandated and fringe benefits, the latter is the first to be reduced or eliminated if a company has a budget reduction.
Fringe benefits are usually offered for recruiting and retention of workers. Some may include generous paid time off policies, tuition reimbursement, and even a company car.
When the business climate is slow or worse, in a recession the following can be a result:
Understandably, the loss of employment translates to a loss in coverage if coverage is supplied by the employer. The Worker Adjustment and Retraining Notification Act (WARN) requires businesses with 100 or more employees (excluding those who have worked less than six of the last 12 months and those who, on average, work less than 20 hours a week) to provide 60 days’ advance written notice of the upcoming layoffs. Several states have applied similar legislation to small businesses, allowing employees from all backgrounds time to find alternative coverage solutions.
Furloughs have become common since the arrival of COVID-19. Because they are performed to save a business money, or sustain its survival, this option is often turned to after the elimination of fringe benefits. In most cases, businesses attempt to continue health coverage throughout the furlough.
If a business is facing financial hardship, reducing employee pay can be a more practical alternative to layoffs. While it can be demoralizing, employees usually won’t lose their health insurance coverage -- although they may be forced to pay more toward their premiums each month.
Such severe circumstances can cause significant changes in an employee’s life. While losing your job or the salary you’ve grown accustomed to can be difficult, most people won’t need to worry about losing their health insurance coverage -- at least not immediately. As a business owner, it is your responsibility to let your workers know of any major changes that will affect their wages or employment status.
The legalities surrounding company-sponsored insurance are clear cut; if benefits are being reduced, notification is required within 60 days of the adoption of such reductions. While you can be on the hook if they fail to inform your employees of these changes, things get considerably messier if the changes are based on discrimination. No employer is able to decide who gets health benefits and who doesn’t because of age, gender, race, or current health condition. The only distinction that can be made is between part-time and full-time employees; anything beyond that in most scenarios is forbidden by federal laws.
Can employers make changes to their benefits plans? Yes. Can they do so without informing their employees? Absolutely not. Whether you’re a benefits manager at a massive corporation or a small business owner with six employees, you are allowed to rescind or limit benefits for a number of reasons, including something as simple as the maintenance of insurance costs.
However, you are required to give notice to your employees within a specific time frame; this flow of information allows current workers to find new coverage or supplement any expected loss in time to prevent gaps in coverage while also serving to maintain trust and goodwill between the two parties.Looking for more exclusive content? Check out what’s trending on the Mployer Advisor blog, and be sure to read more about the importance of employee benefits plans here.
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.
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.
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.
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:
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:
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.
But, how do you know who to hire? With seemingly endless options, you feel under pressure to choose the right one. We believe that transparency, information, and choice leads to better hiring decisions.
It's why we created Mployer Advisor, a free broker marketplace that allows employers to compare brokers, consultants, and advisors in one place.
Looking for more exclusive content? Check out what’s trending on the Mployer Advisor blog, and learn more about small business health insurance costs here.
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.
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.
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):
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.
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:
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.
Want to discover more Mployer Advisor exclusive content? Check out our blog.
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To manage insurance and benefit costs, employers often structure their benefits plans to differentiate employee populations regarding their level of benefits. Part-time employees generally are not eligible for benefits, but many businesses often have questions about the eligibility requirements for temporary and seasonal full-time employees.
Temporary full-time employees are typically eligible for benefits when they work for at least 30 hours per week and are hired into a position for less than 12 months.
Employee eligibility depends on several factors, including whether the temporary work is paid or unpaid, if they are seasonal or variable-hour workers, and whether the size of your company applies for regulations under the Affordable Care Act (ACA). Federal laws do not require you to provide the same benefit coverage to all employees, but, some states have laws and requirements on certain benefits, like paid sick leave, that apply to every employee.
In this post, we will define the different types of temporary full-time employees and explain when these employees are eligible for benefits.
Temporary full-time employees (called short-term employees in the ACA) are typically eligible for the same benefits as regular full-time employees. So, employers need to know how to classify these workers.
The IRS defines a temporary full-time employee as an employee who works at least 30 hours per week on average (130 hours of service per month) and accepts a position for less than one year.
To avoid potential penalties, applicable large employers (ALEs), with 50+ employees, should understand which temporary employees are “full-time” under the ACA and therefore eligible for benefits. Even if you have fewer than 50 full-time employees, you may need to comply with ACA requirements surrounding full-time equivalent employees.
The IRS does not allow exemptions for penalties for variable-hour, seasonal, temporary/short-term employees, unless the employee meets specific requirements applicable for each type. However, non-employees like 1099s and independent contractors are not categorized as "employees" under the ACA, so they do not require health benefits. In addition, volunteer and student employees may be excluded.
If you are unsure at the time you hire an employee whether they will work full-time hours, they can be deemed a variable-hour employee. Employees with variable hours may be considered full-time, benefits-eligible employees if they work 30-plus hours per week on average.
Applicable large employers can identify which variable-hour employees should be eligible for benefits by:
A seasonal employee is hired into a position where the typical annual employment is less than six months and occurs during the same part of the year, such as winter or summer.
For seasonal employee eligibility, employers should use the initial measurement period, even if they work more than 30 hours per week. New seasonal employees are treated similarly to new variable-hour employees, using the look-back measurement period.
It is possible for interns or temporary workers to fit into these exempt seasonal or variable-hour categories. Employers should consult a benefits broker, health insurance agent and/or legal counsel for clarification around categorizing these different groups of employees.
The ACA requires applicable large employers to either offer health insurance benefits to its full-time employees or pay a fine. Temporary workers who are not variable-hour or seasonal employees and work 30 hours a week should be classified as full-time, benefits-eligible employees.
You can employ a temporary full-time employee for a maximum 90 days without offering them benefits by creating a separate class for specific temporary workers or interns. Within the 90 day waiting period, an ALE should offer coverage to temporary employees or interns who you anticipate will work full-time hours. See separate classes below.
Using the look-back measurement, employers can take three to 12 months from the hiring date to evaluate an employee’s status before making an offer of coverage. But, if the temporary employee works 30-plus hours per week during this time, employers need to offer benefits.
If you fail to offer health coverage to seasonal employees during an initial measurement period, you are generally not liable for ACA penalties, even if they end up working full-time hours during that period.
For an ALE, failure to offer minimum essential coverage to 95% of full-time employees can carry a penalty of $2,500 per year for every employee. If you meet the 95% threshold but still do not offer coverage to certain workers, a penalty of $3,750 per year could apply for each employee.
Large employers can establish separate employee classes to deal with benefits for temporary workers or interns with the 90 day waiting period. Due to this short-term employment, many of these employees do not satisfy the waiting period before leaving the company, therefore never becoming eligible for coverage.
For employers that are not ALEs under the Affordable Care Act, determining whether temporary employees should receive benefits requires reviewing the terms of their contract and state regulations. Here are questions to consider:
What are your provisions for eligibility? Do the temporary full-time employees meet those requirements? Do they have exclusions for seasonal or variable-hour work?
The answers will help you determine eligibility under your benefits plan for temporary employees.
Human resources professionals implementing benefit plans should assess their employee population to understand who is eligible. And remember, when establishing separate classes of employees for benefits, it is imperative to remain compliant with HIPAA nondiscrimination rules.
Of course, each hiring situation is different, and staffing agencies frequently work with employers to provide temporary benefits. A benefits broker can help you decide when your employees are eligible for benefits in each situation.
Want to see how your comprehensive benefits package compares to companies like yours nationwide? Take our Employee Benefits Scorecard Quiz.
Interested in reading more relatable content? Read Everything You Need to Know About Offering Employees Health Insurance.
After conducting a survey of 1,500 employees in the healthcare field, the authors of the article determined that the key issues underpinning satisfaction on the job are a supportive environment, the availability of professional development opportunities, and generally feeling valued by the organization, which all ring true beyond the purview of the healthcare industry as well, of course.
While the survey also found pay and benefits to be contributing factors, they were not determined to be as significant with regard to job satisfaction as creating a culture that enables productive and positive relationships between supervisors and employees, who feel supported as well encouraged and guided in the pursuit of professional growth opportunities.
You can read more about the survey and the authors’ conclusions here.
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