5 Most Commonly Asked Questions about Starting a New Benefit Plan

If your company is contemplating the idea of starting a benefits plan, you will likely have a few questions, but mostly, you probably want to know how much it’s going to cost. While we can provide a general estimate, there are a few things you need to consider. To lessen the wonder about starting a new employee benefits plan, here are the top five questions I get asked as a benefits consultant, and their answers.

1. What information do we need to provide to receive a quote?

In order to properly prepare a proposal and provide realistic figures, we need to collect pertinent employee information. This includes employee names (or initials only to protect privacy), date of birth, marital status, position, and salary. The salary information allows us to accurately cost out life and disability benefits that might have a payout based on a percentage of the salary. If salaries are not provided upfront, we can recommend a flat rate payout for those benefits as well. We also need to know the industry in which your company operates, so that the insurer can evaluate the risks depending on the nature of the industry. Certain higher-risk industries generally require additional information, which will be requested on a need-as basis.

2. Why do we have to provide detailed and accurate information to receive a quote?

When you want to build a house, do you simply ask how much it will cost? Likely not. You need to provide specifications and requirements so a builder can accurately price it out for you. The same applies to a benefits plan. Just like the builders, the insurers will need to know what they are insuring. If the information is vague, partially complete or based on generalizations, we cannot guarantee that the quote will be accurate. If we have the right information upfront, then we are more inclined to offer a realistic cost for your new benefits plan.

For general knowledge, a benefit plan normally cost around 6-12% of total payroll costs, where different factors play into whether this ends up being less or more. We have also seen individual plans averaging at $80/month and family plans typically being 2.25 times that amount, around $180/month. Again, these are generalized estimations, and every company will differ depending on their unique needs and demographics.

3. Can I tailor my plan only to certain employees or can I make my benefits plan voluntary?

You can set the rules as to who is eligible for your benefits plan, as long as there is no distinction per individual within that rule. In other words, you can say ‘all of management’ or “all of sales” or “everyone working above X hours” is eligible, but you cannot choose to offer a benefits plan only to certain individuals within those general groups.

Generally, if you offer a plan, employee’s participation on the plan should be enforced. The only exception to that is if the employee has a spouse that covers them on their own benefits plan. While some companies have been falsely informed of this fact, and allow ‘opt outs’ without additional spousal coverage, we highly discourage it. For one, there are major liability implications if an employee ever gets into a serious accident and was not covered by a benefits plan that should have legally been enforced by you, the employer.

Also, if employees opt out every year, and participation in the group benefits plan lessens, rates will go up for actual participants and you will end up paying much more for a benefits plan that very few people will be using. Since a benefits plan is supposed to be offered as a company policy, it is best for employers to enforce its participation to avoid any potential liability.

4. What’s the difference between the individual and group plan?

We always recommend group plans as there are significant cost savings involved. However, this normally requires a minimum of three employees. For very small companies or start-ups, individual plans can be taken out for each employee uniquely. While this does require more paperwork, and more scrutinizing of each person’s medical history by the insurer, it is still a viable option.

5. How do I know if I am ready for a plan or what if we don’t have the budget?

If you are looking for ways to reward your employees, or to better attract and retain top talent, then considering a benefits plan is the right move. If budget becomes a concern, consider your payroll and how you can use that budget to fund this new employee perk. For example, you can offer new employee a slightly lower salary to compensate for the expense. Depending on the individual, knowing their family’s medical expenses will be covered, or their massage and physiotherapy services are not out of pocket anymore might be more attractive than a little more cash in their hands. Other companies choose to split the cost of the monthly premium with their employees to alleviate some of the financial burden. Typically we see companies paying 100%, 80% or 70%, all the way down to the minimum 50%.

These are just a few questions that I get from prospective clients who are interested in starting a benefits plan. If you have any more, please feel free to contact us.

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