Health and Welfare, Retirement

Understanding and Communicating Your Company’s Benefit Plans

Given the current labor economy, benefits are becoming more important than ever in attracting and retaining great employees.  Crafting the right benefits package and communicating it to current and potential employees can be just as important as the salary paid.

Understanding the benefits package of your company and how it operates can be daunting.  Communicating it to the rest of the company can prove overwhelming! Here are some tips to help you with your company’s benefits.

Lean on your benefits providers

One of the most important steps to communicating your company benefit plans is to know what resources are available to you.  Many benefit providers have great marketing pieces that can help employees know the basics of the benefits offered by your company.  More detailed information for a specific benefit can be found either on the provider’s website or in your company’s benefit plan document or summary plan description. Your benefit plan document should be reviewed at least annually, prior to open enrollment, to ensure that your plan is operating in compliance and to verify all company information is correct.  This is also the time to decide if any changes should be made in the offerings or operation of your plans to allow for maximum benefit to your employees.  Make sure you give plenty of time for changes to be made to your plan document so that they will become effective before the new plan year. The summary plan description should be distributed to all employees each year.

Don’t skip annual benefits meetings

Annual benefit enrollment meetings are a great time to present all the wonderful benefits your company is offering to your employees.  This is a great internal marketing time to express the vision and mission of your company and show how it truly values their employees.  Allowing employees to see all the benefits available can help increase employee retention and engagement.  When an employee knows they are important and a focus for your company, there is a feeling of teamwork and cooperation that propels the company forward to meet its goals.

Another great reason to offer annual benefit enrollment meetings is to allow your employees an open time to ask questions and see how each benefit could be applied to their personal situation.  The benefits broker or third-party administrator(TPA) your company has chosen to work with should be able to provide knowledgeable presenters that can answer questions specific to your plan.  They can also act as a liaison between your company and the benefit carrier to get more detailed information or resolve any complications that come up.

Be smart with pre-tax and post-tax benefits

Additional aspects of benefits that need to be clearly understood are the operation and tax implications for each benefit.  Which premiums should be withheld pre-tax versus post-tax?  There are possibilities that the premiums for some benefits could be taken either pre-tax or post-tax.  Your decision will determine whether the payout of those benefits is taxable to the recipient. You may want to consider withholding premiums for Life, AD&D, Disability and supplemental benefits such as Hospitalization and Accident indemnity plans post-tax, to ensure that any benefits paid out will be tax-free to the recipients, and the company will not be held liable for withholding taxes on them. Most employees would rather pay taxes on the smaller premiums paid than on a larger settlement if received.  And most companies will not want to be liable to ensure that appropriate taxes are paid on claim payments they may not even know have happened in the case of indemnity plan payouts. It is very important to understand how each of your benefits should be handled through payroll to give your employees the greatest return available.

Other benefits that are directly tied to medical expenses (premiums for health, dental, and vision insurance, Flexible Spending Accounts (FSAs), and Health Savings Accounts (HSAs)), can be withheld pre-tax if the company has adopted a Cafeteria Plan.

Health Reimbursement Accounts (HRAs), which are 100% employer-funded, are also a great option for companies who want to do more to help their employees with ever-increasing out-of-pocket medical expenses. HRAs can be tailored to the goals of the employer, both in terms of eligibility and payout for qualifying health expenses.  While the employee is not responsible for contributing to an HRA plan, they will reap the rewards of tax-free claim reimbursements for out-of-pocket expenses, and the employer will benefit through additional tax savings as well.

For retirement plans, contributions can be made both pre- and post-tax. However, keep in mind the same rules apply to pre-tax contributions to retirement as apply to pre-tax supplemental insurances—if your employees’ contributions are pre-tax, then their payouts or distributions during retirement are taxable. Be sure to communicate this to employees during their initial enrollment into the plan—especially if you offer both traditional and Roth plans–as this may affect their strategy for retirement planning.