With the economy opening back up and the world slowly transitioning back to normal, business owners are looking at the future of their companies. One of the critical challenges for this post COVID world is a company’s ability to attract and retain top talent. Employee Benefits can set you apart from other companies and attract the applicants you are looking for.
An extraordinary health benefits package is not only advantageous for your employees but also your business. Benefits make a statement about the value a company places on their employees; however, offering benefits is only valuable for a business if the plan is managed well and the right package is chosen.
We asked a health benefits expert, Barry Hutchins from WealthCo Group Benefits, to provide some helpful information. Barry has 30 years of experience and has consulted on benefit plans from large corporations to small family-run businesses. Check out what he had to say:
Why should business owners have an employee benefits plan?
“From the time that employee benefits plans began to rise to prominence in the 1940’s they have become an increasingly important tool in providing employers with a competitive edge. They attract top talent and minimize the cost of employee turn-over by giving employees access to comprehensive coverage at reduced group rates with no medical underwriting. Essentially, employee benefits are an effective way to promote healthy outcomes for your workforce, and increase employees’ financial peace of mind, which naturally leads to higher morale and increased engagement and productivity.”
Is there a minimum number of employees required to get group benefits?
“Each insurance carrier will have its own niche market size, but WealthCo, through our strategic partnerships, can provide coverage to a group size as small as three. There are some restrictions though, such as the plan members cannot all be from the same family and there must be at least one arm’s length employee.”
What are the benefits for business owners to get group insurance for their companies?
“Simply put, it is a tax effective form of remuneration – employer premium is tax deductible as a business expense and benefits received by employees in the form of claims reimbursement is generally tax free (except in Quebec). Employee benefits can also be less expensive than offering salary increases as there is no impact to payroll taxes (CPP/EI/WCB).”
Does the business owner have to have the same benefits as employees?
“A group insurance plan can have multiple classifications of plan members and each class can offer different levels of coverage and different premium cost sharing arrangements. This could mean having an Owners class and an All Others class, or it could mean having an Executive class, a Management class, and Hourly Employees class. So long as the class structure precludes discrimination, just about anything is possible. I would recommend that all medical and dental expenses for a business owner and his/her family be run through the company benefits plan to maximize tax efficiencies. A business owner should not be paying for these expenses in after tax dollars that may not qualify for the medical expense tax credit.”
If someone has a limited budget for group benefits, can they still get a plan that works for them?
“An effective benefits plan can be built around just about any budget with the right planning. Being mindful of both current costs and future costs is key. Premiums are recalculated each year at renewal so costs today may not be the same as costs tomorrow. Premium costs can also be shared with employees.
Insurance carriers recommend that the employer contribution of premium be at least 50% of the total to demonstrate they have a vested interest in the plan. And employees’ share of premium contributions should be designed to maximum tax efficiencies. Employer paid premiums for life and accident benefits are taxable, and short and long term disability benefits paid to employees are also taxable if the employer contributes to these premiums. If employees are sharing in the premium costs, their share should first be going toward funding the disability benefits, followed by the life/AD&D benefits, and any remaining balance toward health/dental.”
Some business owners have seen their benefits plan cost increase year after year, how often should they be shopping their benefits plan to different insurance carriers?
“We generally recommend that a benefits plan should be marketed every 3 to 5 years, or more often than that if there are serious service or financial issues, or if there has been a significant change in the employee make-up. It is also important to note that a plan can also be marketed too often. Carriers may not provide a proposal on a group that has only been with its current carrier for one year and if they continue to see marketings for the same group year after year, they may decide not to quote for this reason as well. In our experience, a well timed marketing strategy will maximize savings in the long term.”
How often should a business owner be taking a close look at their benefits plan’s performance?
“Employers should be continually examining and re-examining their benefits plans regardless of the size of the group. As a business grows, a benefits plan needs to evolve to make sure that it remains relevant to the employees who are covered by the plan. In addition, quarterly claims experience reviews with an expert advisor will identify any emerging trends or anomalies and allow you to act proactively rather than reactively at renewal time when premiums are increasing. Renewal premium rate adjustments should never be a surprise if your plan is being properly managed.”
What are some signs that a business owner may need to update their employee benefits plan?
“Too many employers put a plan design in place and never look at it again. This can seriously erode employees’ real and perceived value of the plan (particularly if they are sharing in the cost of the premium). As salaries rise plan maximums for income related life and disability benefits can become inadequate, higher medical-free limits for coverage could also be available to growing companies, and plan features like deductibles and benefit dollar maximums, as well as dental fee guides can become outdated due to inflationary pressures. A good advisor should be reviewing the plan design with you every year at renewal.”
What are the impacts of changing insurance providers?
“A qualified advisor will do all the heavy lifting for you. Special arrangements must be made with both the incoming and outgoing carrier for any employees not actively at work on the date of transfer to make sure that no employee loses coverage. No two carriers will offer the exact same coverage; your advisor should review any changes or deviations in coverage with you prior to changing carriers.”
Can employees take their benefits with them when they leave or retire?
“By the very nature of a group plan, once an employee is no longer a part of that group, he/she can no longer participate in the plan. There are however options to convert coverage to an individual plan upon termination of employment without medical proof of insurability. This can be vitally important to an employee with health issues or a family member who has health issues. There are time deadlines though, and these can vary by line of benefit and by carrier. Your advisor should be able to review these conversion options with you.”
What other final tips do you have?
“I would say that just like your business, start small and grow. It is far easier to add to the plan later, than it is to take something away if plan costs escalate. Provide benefits that employees want and value, but don’t forget to build in cost-containment features. And finally, continue to monitor the performance of your plan with a trusted and knowledgeable advisor on a regular basis.”
If you would like to explore your employee benefits plan, feel free to contact us at CAT-inquire@bakertilly.ca