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Employee Benefits in Terms Business Owners can Appreciate

Written By: Kelly Moore
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This guide allows business owners maximizing available health care products in the ever-changing world of employee benefits.  The examples are in terms that everyone can relate to---- Ice Cream! If you are starting from scratch, be sure to implement these strategies over time, rather than all at once.  A trusted insurance broker, who is competent, caring, and understands your needs, will make this journey much more fulfilling.

Chocolate, Vanilla and Swirl – plus Strawberry

What flavor is right for you?  Take a look at these definitions and decide what blend will work for your unique business.

Chocolate:  You have funds to lure the best and brightest, and want to maximize the value to employees. 

Vanilla:  You want the best protection for your employees at the lowest cost.

Swirl:  You are between Chocolate and Vanilla, and want a creative blend.

Strawberry:  You have no interest in offering a real benefits plan, yet you are willing to offer voluntary plans that are of value to employees.

HINT:  You can mix and match to make your own Benefits Sundae.

  1. Chocolate.  $$$$
    1. Health plans that maximize both tax advantaged plans and traditional choices. 
      1. Medical plan offering will include at least one high-deductible health plan that is Health Savings Account (HSA)-compatible.  Companies may offer that plan alongside traditional HMO and PPO plans, and since the premium is lower, contribute to the employees’ HSA so that the overall contribution is comparable.  The effect is to shift premium dollars into private accounts, to allow employees more control over health care spending…and savings.
      2. A flexible spending account (FSA) to cover dental and vision expenses for all employees, and other health care expenses for those not enrolled in a Health Savings Account.
      3. A traditional dental and vision insurance plan may also be offered.
    1. Disability plan to protect employees’ paycheck in the event they become disabled.  This is 4-5 times more likely than death prior to normal retirement age, so is very important.  Here are ways to offer disability insurance:
      1. Employer-paid, with executive carve out to maximize benefits for higher-paid employees.
      2. Employee-paid to allow the benefit to be tax free, if one does become disabled.
      3. A disability policy may also be used to cover business expenses if a key employee or owner becomes disabled.
    1. Retirement plan.
      1. Normally, a 401(k) plan is offered instead of a pension plan.  The match may range from 4% to 6% to be most competitive.
      2. ESOP or Employee Stock Option plans allow an employee to become part owner in the business, and to benefit as the company grows.
      3. Non-Qualified Executive retirement plans act as an incentive to attract and retain key employees. 
    1. Life Insurance.
      1. Offer a minimum of $50,000 of basic life and accidental death & dismemberment, up to 2-3 times salary with a limit of $500,000.
      2. Offer a voluntary, or employee-paid life insurance policy for employees and their dependents.  These have “guarantee issue” coverage, and some have a universal or whole life component.
      3. Life insurance may also be used to protect the business in the death of a key employee or owner of the business.
    1. Voluntary Benefits.
      1. Employee-paid plans, such as accident and specified illness policies may be administered through payroll with minimal effort.
  1. Vanilla. $$
    1. A health plan that provides catastrophic protection, with a buy up options.
      1. Medical plan offering will include one major medical plan that provides catastrophic protection, and some level of maintenance care, with the ability for the employee to “buy up” to traditional HMO and PPO plans.
      2. Company would pay at least half of the catastrophic plan cost for employees only (not dependents). 
      3. Provide access to specialists in individual health products and also government-sponsored products, to find a cost effective option for dependents.
    1. Ancillary package including dental, vision and life, which could be employee-paid (voluntary or employer-paid).
    2. Direct deposit voluntarily from employees to IRA, savings or credit union.
  1. Swirl. $$$
    1. Upgrade health plan options from Vanilla program (or downgrade from Chocolate).  Offer one traditional copay plan in HMO and PPO, and one high-deductible health plan.   
    2. Employer contribution could be 75% toward employee coverage, and 25% for dependents.  Alternative: simply provide a flat dollar amount for each employee, which they spend as they see fit.
    3. Add in disability insurance, either employer-paid or voluntary.
    4. Retirement plan – implement a 401k with no match if funds are tight.  If the business is profitable, the owners and key employees may defer much larger amounts into their retirement plan with safe harbor 401k, using a 4-6% match for non-highly compensated employees.
    5. Stir in voluntary (employee-paid) plans (accident, specified illness) that can be administered through payroll with minimal effort.
  1. Strawberry. $
    1. If the employer pays a minimal amount, such as $10 per employee per month, voluntary enrollment companies will be able to offer something for everyone, and employees may buy a mix of plans including limited medical plans, accident plans, dental/vision plans, as well as life and disability insurance.
    2. If the population is largely uninsured, be sure to provide access to education about low or no cost health insurance through government-sponsored programs (MediCal, AIM, Health Families).
    1. Offer access to telephone or online health information / assistance.
    2. Retirement – a payroll-deduct IRA, or 401k, if business is profitable. 

 

About us:
Moore Benefits, Inc. helps small and mid-sized companies optimize the value of their employee benefit and insurance purchases. This happens through a creative process which allows you to:

• Get more benefits for the money
• Receive value-added services at no additional cost
• Increase employee understanding and satisfaction

Our services are paid through commissions on the insurance plans. The final result is high quality benefit programs and administrative support at a reasonable cost to plan sponsors and plan participants.

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