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What Does the Average Employer Spend on Employee Benefits?

Jeff Griffin

When we’re helping employers cultivate employee benefits packages for their workforce, we’re often asked to benchmark what their peers are spending on them. The answers vary widely based on multiple factors, including geography, industry, size of the workforce, health plans offered, and the overall health of the workforce population, just to name a few.

Employee benefits benchmarking is one of the best ways to figure this out. The best answer for each employer is determined through public and proprietary information, the latter of which can be quite costly, but it’s also quite necessary. Some of our favorite sources for benchmarking include Truven, Kaiser Family Foundation (KFF), Mercer, Windsor, the Society for Human Resource Management (SHRM), the International Foundation for Employee Benefits (IFEB), and the Bureau of Labor Statistics (BLS, who tracks this information and shares it quarterly).

The BLS report breaks data down into multiple categories, including various components of compensation by sector (public, civilian, government). Let’s take a moment to look at the most recent data from the BLS so you can compare how your employee benefits costs stack up.

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Topics: Employee Benefits, CHRO, CFO, Voluntary Benefits, Ancillary Benefits, Worksite Benefits, Audits, employers

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What is a 529 Plan? (And Should You Offer One?)

David Rook

College tuition has been steadily increasing for the past couple decades. While many colleges are trying to increase endowments and offer more scholarships for high-achieving students, other options exist for students to avoid debt. A 529 plan is one of the best tools students have to do just that.

In fact, the new tax law passed by Congress, as well as the recently introduced bi-partisan Boost Saving for College Act, both bring about a few changes to 529s worth checking out (read below). 

Just consider that in 2017, the average cost of a four-year undergraduate degree at a public college for in-state residents was nearly $57,000 for tuition, fees, and room and board — of course, that’s assuming the student graduates in four years. Many degrees are stretched to four and a half or five years if internships or cooperative education programs (co-ops) are involved.

Families who can afford it have been saving for college for a long time, and thanks to 529 plans, many are able to do so with tax advantages. Some employers have even started to offer them to employees as a way to incentivize them to plan ahead for college savings. And thankfully, some state governments (like Arizona) have begun to offer extra state tax incentives, as well.

What is a 529 Plan?

Congress developed 529 plans in 1996 as a way to “make it easier to save for college and other post-secondary training for a designated beneficiary, such as a child or grandchild.” While not-so-cleverly nicknamed after the section of the Internal Revenue code that discusses them, 529 plans are legally called “qualified tuition plans.”

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Topics: Employee Benefits, Voluntary Benefits, Recruiting, Worksite Benefits, Ancillary Benefits, Arizona, Culture

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How To Cut Benefit Costs Without Compromising Employee Satisfaction

David Rook

Every employer is looking to cut employee benefits costs, but it can be difficult to do so without compromising employee satisfaction. Employers therefore need to be careful when restructuring their benefit offerings.

Of course the most common way to cut employee benefits costs is to alter medical plan design, since medical coverage makes up a significant portion of benefit expenses. That said, it's not the only way to tame costs. Here are some of the most popular areas for cost savings.

Medical Plan Design

One of the most popular ways to cut employee benefits costs these days is switching to high deductible health plans (HDHPs), which reduces the cost of medical premium while pushing up deductibles. It should be noted, however, that HDHPs must be introduced with a great deal of employee education, since out-of-pocket expenses flow very differently than with those of traditional health plans.

For example, if offered multiple plan choices, some employees may elect an HDHP (in absence of any education), simply in an effort to save on premiums, when another plan was perhaps more appropriate for their particular situation. These employees may then experience buyer’s-remorse as the plan year unfolds, which contributes to the negatively surrounding HDHPs, which is undoubtedly one of the reasons these plans come with mixed reviews.

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Topics: Employee Benefits, Cost Containment, Voluntary Benefits, Ancillary Benefits, Worksite Benefits, Plan Design, wellness program

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Why Voluntary Benefits are Critical with HDHPs

David Rook

In the never-ending quest to curb employee benefits costs, many companies have transitioned away from traditional healthcare plans and toward high deductible health plans (HDHPs) with savings options, such as health savings accounts (HSAs).

The danger with high deductible health plans (especially for employers who don't help fund the HSA nor employees who don’t stow away the premium savings for a rainy day) is that they can leave a participant extremely vulnerable in the event of a catastrophic event, such as a heart attack or stroke. Even an extended hospitalization or the diagnosis of a chronic condition can run up the tab. Therefore, it’s imperative that employers add the right voluntary benefits to their portfolio to help shore up with vulnerabilities.

Voluntary benefits are a great way to beef up your employee benefits package without increasing costs. Employees feel better equipped to deal with unanticipated health issues and employers don’t have to invest any additional money into their benefits package. If you’re considering offering a HDHP to your workforce (whether as one medical option or the only medical option), voluntary benefits can be a great way for employees to supplement their health insurance policy.

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Topics: Employee Benefits, Ancillary Benefits, Voluntary Benefits, Worksite Benefits, Plan Design, Cost Containment

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When Does it Make Sense to Offer Voluntary Benefits?

Jeff Griffin

Voluntary benefits have been particularly popular in the past few years as healthcare costs rise and employers continue to shift more of the cost burden onto employees. Benefits that were once completely or partially financed by the employer, such as dental and vision, are sometimes now voluntary. A growing number of employers have also replaced low deductible health plans with high deductible health plans.   

But if you’re not careful, cutting these types of benefits can present a coverage gap for your employees, many of whom are not prepared to take the hit on unexpected medical expenses. This could leave you with a financially insecure workforce — not to mention a stressed, unhealthy and ultimately unhappy one. Offering voluntary benefits can be a meaningful addition to an employee benefits package and a win for employees and businesses alike: employees feel as though they have helpful supplements to their health insurance, and employers don’t have to increase their health care budget to offer them.

Required Benefits vs. Voluntary Benefits

As we’ve discussed in the past, certain employee benefits are required by law, and employers who fail to provide them can be hit with serious — and costly — penalties. These benefits include social security and Medicare withholding, unemployment insurance and workers’ compensation benefits. Depending on where an employer is located and how many employees it has, it may also be required by law to provide disability insurance, FMLA benefits and “acceptable” health insurance per federal statute.

Voluntary benefits, on the other hand, are usually paid 100% by the policyholder, and employers are neither expected nor required to cover any portion of the premium. Furthermore, what constitutes a “voluntary benefit” is frequently up for debate — some claim it’s a benefit paid entirely by the employee, while others say it can include benefits that are partially subsidized by the employer. In reality, almost all benefits are voluntary, as employees can waive coverage as long as a benefit is not required by law.

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Topics: Employee Benefits, Employee Retention, Voluntary Benefits

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Life Insurance 101: Understanding The Different Products

David Rook

As employers search for ways to create meaningful employee benefits packages, many have turned to life insurance policies. It’s become fairly standard to offer life insurance in the amount of the employee’s annual salary at no cost to the worker. Beyond that, it’s common to offer “buy up” options for employees who might want additional coverage for themselves, or sometimes for a spouse. This could be double, triple, or even five times the amount of a person’s annual salary and in these cases, the premium for extra coverage is typically paid entirely by the employee.

Life Insurance 101: Understanding the Policies

Much like health insurance, life insurance options can be confusing. There are three different types (whole, universal, and term) and even variants among those three. How are people supposed to choose? How do they know which policy is best for their family? We put together a cheat sheet to prepare employees and HR professionals alike to make a more informed decision.

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Topics: Employee Benefits, Voluntary Benefits, Ancillary Benefits, Worksite Benefits

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If You Aren’t Offering Voluntary Benefits, You're Missing Out

David Rook

When building a comprehensive benefits package, many business owners are (understandably) grateful just to be able to offer medical coverage. But some employers also tend to leave out voluntary benefits, which can enrich the employment experience and be a helpful recruitment tool for potential employees — all at little or no cost to the employer. If voluntary benefits are outside your purview, check out this quick-reference guide to fill in the blanks.

What Are Voluntary Benefits?

While the definition of voluntary benefits has become somewhat blurred over the years (and are sometimes referred to as worksite benefits or even ancillary benefits) they are, for the most part, insurance products meant to fill in healthcare gaps where health, dental, and vision insurance might not reach, and can increase the value of your employee benefits package. Typically, voluntary benefits are paid in full by the employee and made easy through payroll deductions — most of the time at a lower rate than what can be found on the individual market and frequently taken out of wages pre-tax.

Common examples of voluntary benefits include:

  • Accident Insurance: Provides compensation to employees if they suffer major physical harm due to an accident. Some insurance policies even reimburse employees for seeing their doctor a couple times per year.
  • Critical Illness: Provides a lump sum to enrollees in the event of a critical illness (such as a heart attack or stroke) which can be used to pay medical or non-medical expenses (like child-care) while an employee is unable to work.
  • Cancer Insurance: In the event of a cancer diagnoses, an enrollee receives money with which to pay for treatment and sometimes, to help pay non-medical expenses.
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Topics: Employee Benefits, Plan Design, Voluntary Benefits, Cost Containment

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