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Small Business Employee Benefits and HR Blog

Which Companies are Good Prospects for Defined Contribution?

May 21, 2014
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Companies of all shapes and sizes are adopting "Pure" Defined Contribution Health Plans. Likewise, Health Insurance Professionals are offering Defined Contribution to retain and grow their book of businesses in this changing health insurance market.Checklist_on_Ideal_Company_for_DCP

Recently, we wrote in detail about the ideal company for "Pure" Defined Contribution. This article outlines two types of prospects, and the characteristics making them great prospects for Defined Contribution.

Tip: These tips are from our new checklist on Identifying the Ideal Company for Defined Contribution. Download the PDF checklist here.

Prospect #1 - An Employer Not Currently Offering a Group Plan

The following characteristics makes an employer, who is not currently offering a group plan, a good prospect for a Defined Contribution Solution:

  • Employer has 2 to 49 W-2 employees.

  • The employer wants to offer a benefit to some or all employees (they want to contribute to employees' healthcare).

  • The employer wants to use health benefits as an employee recruiting and retention tool.

  • The company is looking to grow their business and increase or maintain staff size.

  • Group health insurance doesn't work for them due to cost, participation, etc.

  • They have employees in multiple states.

  • Employees already have individual policies.

Prospect #2 - An Employer Currently Offering a Group Plan

The following characteristics makes an employer, who is currently offering a group plan, a good prospect for a Defined Contribution Solution:

  • Employer has 2 to 49 W-2 employees. (Tip: employers with 50+ employees can also be a good fit for Defined Contribution, but they will need to consider potential employer shared responsibility fees -- set to begin in 2015 or 2016, depending on number of full-time employees).

  • Their existing group health insurance plan is becoming unaffordable due to a recent rate increase.

  • They are having difficulty meeting existing group plan minimum participation requirements.

  • Administration is a concern; they are tired of feeling like they are in the group insurance business.

  • The company desires employees to take charge of their own coverage.

  • Employees are discouraged by reduced benefits and/or higher premiums. 

Ideal Markets for Defined Contribution

Defined Contribution works well for companies in all industries, and in all U.S. states. Here are a few example markets that tend to adopt, and be very happy with, Defined Contribution Solutions.

What questions do you have about which companies are the best prospects for Defined Contribution? Leave a comment below.

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