An unappreciated cygnet grows up around condescending ducklings feeling inadequate and inferior. The self-absorbed ducklings strut haughtily along, smug in their ignorance until the swan matures and they find themselves outclassed.
Sounds just like the plot of a classic fable, right? As it turns out, this might also describe the attitude of far too many traditional financial services professionals toward voluntary benefits.
As I began working with businesses, I made it a point to start gaining knowledge about worksite benefits. One of my first observations was that many traditional agents don’t think very highly of supplemental benefits. They see money spent on these products as wasted and diverting funds from more “important” ones, such as life insurance, disability or retirement accounts. They don’t appreciate what supplemental benefits offered employers or their employees.
For starters, increasing costs are challenging employers with the dilemma of how to offer more on their human resources benefit palette without running costs through the ceiling. Voluntary benefits provide an avenue to do this and, in fact, can actually lower payroll taxes paid by the business.
There are several carriers that will assist businesses in establishing Section 125 Cafeteria plans at no cost. With premium-only plans there is generally no monthly out-of-pocket admin cost to run the plans. I sum it up for business owners by explaining there are no set-up fees, there are no monthly operating fees and employees use pre-tax dollars to pay for most of the supplemental products. This can save the business payroll taxes on all pre-tax premiums voluntarily paid by the employees. This lowers costs for the employer and adds benefits for employees.
Carriers now have a wide variety of products to offer employees. Disability, life insurance (both permanent and term), cancer, accident, hospital, critical illness, dental and vision, are common. These are normally individually owned policies that can be taken with the employee if they leave the firm, while keeping the same low, discounted rate. Family members can often be included when an employee elects coverage.
Innovative options are making their way onto the benefits palette as well. Legal services are now more common and some carriers are trying to find ways to add home and auto insurance to the mix. Stay tuned for more innovation in this area. A full cafeteria plan, as opposed to a premium-only one, can incorporate unreimbursed medical coverage, dependant day care and commuter travel reimbursement coverage–all paid for with pretax dollars. For a full plan there is frequently a monthly service fee to cover administration the payment of benefits.
Generally the employer isn’t paying for the various protection plans selected by the employees. The workers pay for them and are pleased to have access to the various types of protection. The employer is credited with providing the benefits and reaps the attendant good will.
My own enlightenment began with the now-common cancer plans, which I had always considered unnecessary. I reasoned that if someone had a quality health care plan the cancer policies would be superfluous. That didn’t match the facts when my father-in-law was being treated for terminal multiple-myeloma bone cancer.
It became clear the American Cancer Society’s statement was correct when it said that as much as 40% of the cost of cancer treatment can go unreimbursed with the best health care plans. This was further reinforced when I saw agents delivering checks to families for as much as $15,000 or more after a loved one was diagnosed with cancer and underwent treatment.
At a benefits fair where I was helping man an information booth, one teacher saw the carrier banner and came over with tears in her eyes to explain just how potent the cancer plan she had purchased had been to her recovery. Her top-tier health plan did indeed pay the lion’s share of the medical costs. However, while she was undergoing the debilitating chemo and radiation regimen, the cancer policy she had purchased at a fellow teacher’s insistence paid benefits she used to hire a house cleaner and a cook. She could rest, recoup her strength and heal while her meals were prepared for her and her home was kept neat.
With the unsettled future of the healthcare arena uncertain and the cost parabola rising sharply, voluntary worksite benefits could help employers control costs, give employees expanded benefits and allow advisors to bring value to their clients. It’s hard to see where that’s anything other than a win-win-win situation. A more holistic approach to employer benefits may be helping advisors see the beauty of voluntary benefits.