Understanding voluntary benefits

This article will ... Define what voluntary benefits are and how they can help both employees and employers. Note the kinds of voluntary benefits that can be offered in an employer’s benefit program. Point out the cost advantages voluntary benefits can provide employees.

This probably won’t come as a surprise to you, but your employees deal with stress on a daily basis — and we’re not talking about work-related stress. More often than not, it’s financial stress.

Indeed, according to one survey of employers, 48 percent said that financial stress has a significant impact on their employees.

Figuring out how they are going to pay a large or unexpected bill, manage debt and make ends meet are things that consume an employee’s time outside of work — and often at work, as well. The bottom line is distracted workers are less productive workers.

If employers can help alleviate their employees’ financial stress and improve financial literacy, productivity could increase and they may even attract better quality candidates because of their benefits program and retain the current ones they have. Voluntary benefits offer employees affordable financial solutions that they elect and pay for themselves, avoiding significant financial burden on employers. Sometimes the voluntary benefits may be offered at no cost to the employees. Savvy candidates look for these richer benefits when considering job opportunities.

If you’re finding that attracting and retaining quality employees can be competitive, consider that voluntary benefits are a low-investment opportunity to provide meaningful and comprehensive benefits without breaking the bank. For smaller employers, voluntary benefit packages are a way to compete with larger businesses that often are able to offer more diverse benefits.

Making your voluntary program a success

You want your employees to feel protected and confident, and voluntary benefits can help. They may include access to products such as:

• Life and disability income insurance.
• Employee assistance programs (EAPs) that help employees with personal concerns, such as stress management and smoking cessation.
• Financial literacy training.

However, critical to the success of any voluntary program is not only bringing a good set of quality products from a reputable and financially strong provider to the workplace, but also complementing them with employee education, easily accessible enrollment tools, and resources and guidance to help employees decide which benefits are right for them.

Employees need to learn how voluntary products can benefit them, how to weigh the costs, and figure out how much coverage they need — and can afford — in order to help ensure their financial stress is reduced. Consider offering tools that help an employee create a roadmap for their individual benefits, budget, needs, and solutions. (Related: What benefits are employees looking for?)

It's best for employers to consider their voluntary budget from a holistic viewpoint — what can the company afford to spend on financial education, tools, and if possible, in subsidizing employee out-of-pocket costs? Alternatives to funding a defined voluntary benefits offering for an employee group might include an employer contribution or a spending credit.

Types of voluntary coverages

Costs can add up quickly in unusual or catastrophic circumstances, like an unforeseen injury or illness keeping an employee out of work. This is more common than you may think: One in every four 20-year-olds will become disabled before they reach retirement age.¹
These voluntary benefits can address unforeseen costs and income loss for future risks. For example:

• Life insurance can help provide financial security for an employee's family in the event of the employee's death.
• Disability income insurance typically provides income replacement coverage of about 60 percent of an employee’s pre-disability income if they become too sick or injured to work for an extended period of time.
• Critical illness coverage will pay a flat dollar amount for specific diseases or illness that an employee can use toward out-of-pocket medical costs or in-home care.
• Accident coverage provides a lump sum based on injury type.
• Vision and dental coverage, while not typically catastrophic, helps alleviate the costs of unexpected needs or routine maintenance costs that can add up.
• Supplemental health plans can reimburse out-of-pocket costs associated with a hospital stay, such as travel to medical centers outside of the United States.

Employee advantages

One advantage of accessing voluntary benefits through an employer is that the employee may be able to take advantage of lower or discounted rates than they may get if they were to buy the policies on their own.

Another benefit is that medical exams may not be required to obtain coverage. Since the insurance risk is spread over many people, carriers can make policies available with simplified underwriting. More costly premiums and, in some cases, extensive medical underwriting for individual policies may preclude some employees from buying individual policies on their own.

Employees may also consider a voluntary benefit’s convenience. If an employer is researching policies, coverages and reputable carriers, then employees tend to rely on the employer's judgment. Many employees trust the employer to pick a financially strong company to offer quality products.

Finally, some voluntary products, such as individual life and disability income insurance, are portable. That means employees own the policy, and are able to lock in rates at a younger age, and take the policies — including any discounted premiums they may receive with them if they leave the company later.

Your financial professional can provide guidance as you navigate all the voluntary benefits options available to you. Against a backdrop of rising health care costs and uncertain economic conditions, partnering with employees to navigate their insurance needs is more important than ever. Employer-sponsored programs make it easier for employees to access and understand their benefits and achieve financial wellness.

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