A 2015 Glassdoor survey noted that 79% of employees favor more benefits/perks to a pay increase. Most small businesses lean toward a one-size-fits-all employee benefits package. However, such benefit packages are not a favorite among
employees, or business owners who want to meet the diverse needs of their workforce. This has brought about an increase in the number of employees favoring consumerized employee benefits. With consumerized employee benefits, employees can pick and choose benefits that complement their lifestyle and financial goals. Heading the list of must-have benefits are Health Insurance Reimbursement and Retirement Saving Plans.
Health Insurance Reimbursement Program
A Health Insurance Reimbursement Program (similar to an HRA), is a notional account used by employers to reimburse employees’ healthcare expenses. Here funds do not accumulate in a separate account, but are reimbursed to employees once the expenses are incurred.
Retirement Saving Plan
There are a number of ways a company can contribute to an employee's retirement. The 401(k) is common and well-known, but there exist other options such as company contributions to employee's Individual Retirement Account (IRA) or Health Savings Account (HSA).
Why Retirement and Health Benefits Go Together
Although employers typically offer HSA contributions as health benefits, they can be a great tool for employees looking to save for future expenses. Employees should contribute the max amount into their HSA each year before they contribute to any other type of retirement account. IRAs and 401(k)s require you to pay state and federal taxes on all money taken out of the account. HSAs are treated the same as IRAs and 401(k)s except when it comes to distributions for qualified medical expenses - which are tax-free at any time. Since medical costs are consistently one of the largest expenses for an aging population, an HSA becomes a way to save tax-free money for retirement.
Education - A Key to Solution
The biggest mistake a company commits is offering abundant benefit options but no education on how best to use them. Employees must be educated on the type of coverage and benefits that best suits them. That’s where advisers can step in and help navigate through the myriad offerings.
By providing flexibility in employee benefits, employers can attract and retain qualified employees.
What strategies have you had for educating employees on your company benefits? Leave a question or comment below.