When attempting to attract new employees, it is important to offer a competitive benefits package. When workers weigh different job opportunities, they will inevitably choose the position that offers them the best salary and benefits package. So, what are the four major types of employee benefits?
A lot of what a company offers will depend on how large the company is. But there are affordable options for all business sizes so there really isn’t a reason to not offer a benefits package that will help to attract top talent to your organization.
Am I Required To Offer Benefits To My Employees
There are some programs that all companies are required to comply with by law. These include: short-term disability, federal and state unemployment, Social Security, Medicare, FICA, and FMLA.
No company is required to offer benefits to their employees. However, since the Affordable Care Act was passed into law, there are penalties for not offering health coverage to at least 95% of full time or full time equivalent (FTE) employees. Applicable Large Employers (ALE), companies that employ more than 50 people, are required to file 1094-C and 1095-C forms each year for each full time or FTE employee. These forms indicate what health coverage options were offered to each employee and if they were enrolled. An ALE can be fined $2,750 for each employee, outside the first 30, who are not offered affordable health coverage options.
4 Major Types Of Employee Benefits
There are 4 major types of employee benefits. They are:
- Health Insurance
- Life Insurance
- Short-Term and Long-Term Disability
- Retirement Plans
As mentioned before, these are not required, but employers can face unnecessary fines by not offering them.
Healthcare coverage is a major concern for many people. One of the best ways to be a competitive employer is to offer affordable, comprehensive healthcare options. Health insurance can include any combination of medical, vision, and dental coverage. Some basic options for choosing health insurance are:
- Traditional indemnity plan – in this option the insurance company either pays the medical provider chosen by the employee directly or provides some amount of reimbursement to the employee
- Managed care through an HMO or PPO – these plans are based on contracts with medical providers and hospital systems; the employee chooses their provider from a list of approved providers and hospitals
- Self Insurance – the employer pays claims and sometimes the employees pay premiums; can use “stop-loss” insurance where the company covers up to a certain dollar amount and insurance covers anything beyond that
- Archer Medical Savings Account – Can be set up by small businesses or self-employed people to cover medical expenses. Disbursements are tax-free and funds can accumulate tax-free indefinitely
Also commonly offered are Flexible Spending Accounts (FSA) or Health Spending Accounts (HSA). Similar to the Archer Medical Savings Account, disbursements are tax-free as long as they are for approved medical purposes.
Life insurance, or Accidental Death & Dismemberment, is also commonly offered in benefit packages. The employee chooses the amount of benefit and chooses a beneficiary to receive that benefit in the event of their demise.
Short-Term/Long-Term Disability Insurance
There are just five states that require short or long-term disability benefits to be offered to employees. For those states that don’t require it, it is up to the employer to decide to provide it or not. These programs offer employees a portion of their wages when they become somehow disabled and unable to work. Short term disability would cover events like surgeries or broken extremities and would cover between 40 and 60 percent of your wages. Long term would cover more permanent illness like cancer, covering 50-60% of your wages.
Employers typically will offer 401(k) plans for retirement. The employee chooses what percentage to put in their fund and that amount is automatically deducted from their pay. Larger companies will sometimes match a certain percent, as well.
Also available are Individual Retirement Accounts (IRA). There are different types of IRA’s, some deductible and some not. Whether or not contributions are deductible depends on income. There are also factors affected by the employee participating in an employer-sponsored retirement program.
The Saving Incentive Match Plan for Employees (SIMPLE) is built for small businesses, and you can choose to use a 401(k) or IRA.
The Simplified Employee Pension (SEP) Plan allows you to contribute a set percentage up to a certain amount every year. Paying in a certain amount, or at all, per year is not required. The employer pays the full cost of this plan.
There are more retirement plans out there, these are only a few of the options.
Reach Out To Professional Employee Benefits Consultants
Sifting through and learning about the different insurances and benefits that employers can offer their employees can be overwhelming. The experts at New City Insurance can help tailor a benefits package that is attractive to employees while being affordable for the employer. Contact your employee benefits consultant today to learn more about how we can assist your company.