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Get the Biggest Bang for Your Benefits Buck
By Richard Hadden and Bill Catlette
Employee benefits – the ones you as an employer pay real cash for – are probably costing you somewhere in the neighborhood of 30% of your payroll each year.
For that kind of money, you want to make sure your benefits investment pays off in the form of a more productive and loyal workforce. To maximize incentive value while minimizing the cost to you, provide benefits that are attractive, flexible, and affordable. It's not an easy combination, but it can be done.
1) Pay attention to the details. When it comes to health insurance, be clear that all plans are NOT created equal. As the competition for talent heats up, workers are closely evaluating the details of health plans to help determine which company to join (or stay with). Managed care that works more like “mangled care" can disrupt an employee's productivity and provide not an attraction, but an irritation.
Employees want to know the answers to these questions: Which doctors can I see? What's covered? How well do they manage their waiting room? Where can I get my prescriptions filled? What drugs will they pay for? When benefits providers come courting you and your Human Resources department, be your employees' advocate, and ask these questions for them, not just the obvious question about cost.
A friend of mine was recently switched, by her employer, from a managed care plan she had grown to love to one she's learning to hate. Before the switch, she visited her friendly doctor who knew her by name, and received a prescription which helped her get well soon. By January, when stricken with another ailment, her insurance company had changed, and she found herself being processed through a big, impersonal healthcare factory. She was given five minutes of a nurse practitioner's time, and presented with a prescription that her carrier wouldn't cover. This, by the way, was the same carrier which mandated she visit this practice.
2) Share the load. It's not only common to ask employees to pay part of the cost of certain benefits, it's fair and effective. That which costs me nothing is perceived as having little value. But would you believe the government will actually bear part of the cost of one of the most attractive benefits going?
I'm talking about Flexible Spending Accounts (FSA's), a component of IRS Section 125, and what people often refer to as a ``Cafeteria Plan", although that term better describes the flexible benefits plan I describe a few paragraphs down.
Under a Section 125, according to Lance Hemmer, of Jacksonville's Taylor Financial Services Group, which sets up employee benefits, employees designate part of their pay to cover reimbursement of certain medical expenses not covered by health insurance. These can include co-payments for office visits or prescriptions, dental treatment, glasses, contacts, hearing devices, or any other eligible medical expense not covered by the employee's insurance.
The beauty of an FSA, according to Hemmer, is that the employer deducts the predetermined amount each pay period, before income taxes are calculated. These pre-tax funds are placed into an account, and when claimed, reimbursement is made directly to the employee. If you're in a 28% tax bracket, and you have $1000 a year deducted, and you use it all within the course of the year, you just made an extra $280. One drawback, Hemmer warns. Section 125 is a ``use-it-or-lose-it" proposition. If you overestimate the amount you'll need, the excess is forfeited.
In addition to unreimbursed medical expenses, you can also have a separate account for Dependent Day Care expenses for children under the age of 13. My wife and I have claimed the maximum $5000 allowance each year since our children were born, resulting in tax savings worth thousands over the last ten years.
3) Provide options. Give people as much flexibility as you can in determining their own benefits. In a real “Cafeteria Plan", the employer allocates an “allowance" to each employee, and lets them spend their dollars as best meets their needs. A single person with no children can trade in dependent health care for more practical benefits. Married parents can beef up their life insurance coverage at the expense of some less useful benefits.
4) Hire a professional. Most companies have no more business managing their benefits than doing their taxes. Unless you happen to be in the benefits management business, you're probably better off turning the whole affair over to a competent professional who does it for a living. They do the legwork, saving you time, effort, and money. Another important advantage: the consultant takes the heat in the unlikely event of incorrect information. If your Human Resources Department unwittingly flubs its advice to an employee, you could find yourself on the losing end of the judge's bench. If the consultant gives you bad information, they assume the liability. Check the Yellow Pages or go online and check under Insurance or Employee Benefits Consultants..
Please print the following attribution for this article: Bill Catlette and Richard Hadden, co-authors of Contented Cows Give Better Milk, help clients clobber the competition by having a focused, fired up, and capably led workforce. They deliver powerful conference keynotes and leadership training. They can be reached at 800-940-7006 (+1-904-720-0870 from outside North America) or www.ContentedCows.com.