Voluntary benefits

Scope

Employers of just about any size can offer voluntary benefits to their employees; it usually depends on the benefits plan if there is a minimum employee requirement. Employees are able to select which voluntary benefits they want (e.g., auto insurance, pet insurance, disability coverage) and purchase them directly from a vendor. The employer has little to no administrative involvement in the voluntary benefit program.

Regulatory citations

• None

Key definitions

• None

Summary of requirements

Employers may offer just one voluntary benefit (such as auto insurance) or an entire portfolio. Their selection will depend on a number of factors:

• The size of the organization
• Demographics
• The cost of the different programs
• The availability of specific benefits
• Employee interest
• Company culture

Employees participating in voluntary programs often receive rates that are lower than individual rates for comparable benefits. Some elective benefit providers offer additional add-ons to their benefits, such as payroll deduction, payroll deduction discounts, and benefit-related education. Many also offer further-discounted rates if a certain number of employees purchase the benefit. As an added incentive to employees, many voluntary benefit programs are portable, meaning they do not end when an individual leaves the organization.

Types of voluntary benefits. Below is a sampling of the many types of voluntary benefit programs available.

• Supplemental life insurance. Group term life insurance may be offered as a qualified benefit through a cafeteria plan, but this benefit may not provide enough coverage for certain families. Supplemental life insurance offers an additional payment upon a wage-earner’s death, terminal illness, or need for long-term care.
• Auto insurance. Group rates on motorcycle, boat, and RV insurance are also available.
• Homeowners or renters insurance. These programs are sometimes offered at lower premium rates than those available in the individual market.
• Disability coverage. These programs might include personal accident insurance or disability insurance. Specialized programs, such as cancer-care insurance, are also offered.
• Pet insurance. Pet owners are now more likely to make their pets’ well-being a priority and, thanks to recent veterinary medical technology advances, are able to do so. Kidney replacement, chemotherapy, hip reconstruction, and other expensive procedures and treatments are no longer just for humans. For many individuals, no cost is too great to extend a pet’s life or otherwise improve its health. Pet insurance can help employees afford these treatments.
• Legal assistance. These programs provide employees legal advice and representation for personal legal matters. In most cases, employment claims are excluded from coverage.
• Discount programs. These benefits allow employees to purchase computers, mobile phones and plans, movie or sporting event tickets, restaurant or attraction gift cards, or other goods and services at discounted rates.
• Long-term care insurance. Though the popularity of this type of benefit has waned in recent years, some individuals view long-term care insurance as a way to gain peace of mind in relation to potential medical expenses in old age or after a disabling event.

Potential downsides. Certain voluntary benefits providers require employers to have a minimum number of employees in order to offer the benefit. This means somewhat limited options for smaller employers.

Additionally, only a fraction of employees are likely sign up for certain voluntary benefits. If an organization is interested in more “outside-the-box” options, such as pet insurance, it might be best to conduct employee surveys. If a large number of employees do not own pets or indicate that they would be unlikely to partake of the benefit, the employer might be barking up the wrong tree.

Communication is key. Communication is, of course, an important tool in turning the tide of benefit dissatisfaction. Unfortunately, many employers fail to adequately promote voluntary benefits options to employees. In order for employees to feel fulfilled by these benefits, they have to be aware of them.

Many voluntary benefit programs provide pre-made marketing materials and telephone hotlines to answer employees’ questions. However, once an employee receives a brochure for an elective benefit program, if the employee does not sign up right away, that brochure will often sit forgotten in a corner of a desk drawer. Annual benefit reminder campaigns, perhaps coordinated with open enrollment activities, might increase awareness and participation in these programs.

Other options. If voluntary benefits are not a good fit, but an organization still wishes to save money and increase satisfaction, there may be other options.

If an organization is making a decrease in its traditional benefits offering, it may choose to give employees something in return. Salary increases or other comparable benefits may lessen the negative effects of cutting certain benefits while still saving the employer money overall.

Finally, aid that is not part of a direct benefit offering may also be useful. For example, organizations which do not offer retirement benefits might sponsor annual retirement-planning workshops for employees. Employees receive a “benefit,” but at less cost to the employer.