No matter the size of the company, offering your Tennessee workers an employee benefits package will not only increase your ability to attract the right employees to your company, but to also retain the ones that you already have. A recent study conducted by one of the nation’s leading providers of employee benefits shows that nearly 70% of Tennessee employees polled believe that offering better employee benefits would entice their colleagues to work harder while significantly lowering the likelihood that they would seek employment elsewhere.
There are generally six types of employer sponsored benefits options:
- Health Insurance
- Life Insurance
- Disability Insurance
- Long-Term Care Insurance
- Cafeteria Plan/Voluntary Benefits
- Retirement/Pension Plans
Health Insurance
Because health care costs in Tennessee have increased significantly in recent years, families and individuals have been seeking private health care coverage to protect them from unexpected illness and injury. Unfortunately, health insurance premium has also increased making private health insurance simply unaffordable for many. For those that can afford it, however, they might find that they’re not eligible because of preexisting health conditions.
Offering group health insurance to employees solves the problem for both situations. Because employers agree to pay a set amount towards each employee’s premium, obtaining health insurance becomes a more affordable option for employees while allowing the company to offer a highly desired benefit without breaking the bank. Because group health plans spread the financial risk amongst a group of employees, insurance companies can offer coverage to those that have been denied by private plans. Even spouses and dependents can be covered by a group health insurance plan.
Group health insurance plans also allow the employer to offer different benefit levels for different classes of employees. For example, an employer may choose to offer a basic plan with a minimum contribution towards premium for hourly workers while offering a more benefit rich plan with higher contributions for salaried workers or management.
Life Insurance
Group life insurance, because of its low cost when compared to the cost of group health insurance, is an economical yet effective way to provide a quality benefit that employees value and appreciate.
For some employees, group life insurance is a less expensive option than purchasing a private policy because preexisting health conditions may raise premium. In fact, if the condition is severe enough, a group life insurance policy may be their only option for gaining this type of coverage if they’re deemed to be uninsurable by a private plan.
Spouses and dependents may also be eligible for coverage under a group life insurance plan depending upon the insurer selected.
Disability Insurance
In most cases, disability insurance is offered as an option that employees can purchase on their own. However, since most disabling injuries and illnesses occur off-the-job (not covered by workers compensation), more employers are now offering disability insurance to employees as a paid-for benefit. There are two types of disability policies available:
- LONG-TERM DISABILITY
This type of plan is designed to replace lost income for as long as a person cannot work, typically until retirement age is reached. - SHORT-TERM DISABILITY
This type of plan is designed to replace lost income while an employee cannot work. Typically, the length of coverage under a short-term plan ranges from 6 months to 2 years.
Long-Term Care Insurance
As employees grow to realize the value of employer sponsored benefits packages, long-term care insurance is quickly becoming one of the more asked for benefits in the workplace. This type of coverage pays for care required when an employee is confined to any qualified long-term care facility or is approved for at-home recovery requiring skilled nursing following an injury or illness.
While many people believe that this type of coverage is included in their health insurance policy, it usually is not; and if it is, the benefit is very limited.
Cafeteria Plan/Voluntary Benefits
A cafeteria plan is an employee benefits option available to employers that allows employees to purchase benefits on a pre-tax basis. It’s also the most underused employee benefits option for small businesses today.
Section 125 of the United States Tax Code allows employees to purchase different benefit options that they choose through a cafeteria plan on a pre-tax basis. Simply put, employees are allowed to pick and choose which benefits they want and are allowed to pay for them before taxes are applied to their income. This lowers the taxable income for the employees, which ultimately increases the percentage of their take-home pay.
Also, when Section 125 is utilized, the employer receives a bonus as well. When employees pay for their benefits on a pretax basis, the amount of payroll is reduced, leading to lower payroll taxes and lower workers compensation premiums.
There are many benefits options available to employees through a cafeteria plan including:
- Life Insurance
- Disability Insurance
- Dental Insurance
- Vision Insurance
- Accident Plans
- Hospital Indemnity Plans
- Intensive Care Plans
- Heart/Stroke Plans
- Specified Disease Plans
Retirement/Pension Plans
With the baby boomers quickly approaching retirement age, the uncertainty of whether Social Security will be there for them continues to grow. This has created great concern for low and middle-classed workers who may not be able to effectively save for the future. A recent survey showed that a whopping 75% of employees polled would use financial planning services if provided by employers.
The most popular retirement savings vehicles are 401(k) Plans, 457 Plans, Employee Stock Ownership Plans (ESOP), and Defined Benefits Plans.
- 401(k) PLAN
This type of plan is a voluntary retirement plan offered to employees of a company that allows up to a certain percentage of their pretax pay to be set aside and invested within the retirement plan. The percentage varies from company to company and can increase each year. The employer can also contribute to the employees plan if they wish in the form of a match or profit sharing contribution. - 457 PLAN
These tax-deferred retirement savings plans are made available to state and municipal employees. Like traditional 401(k) plans, the money you contribute and any earnings that accumulate in your name are not taxed until you withdraw. - EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
This tax-qualified retirement plan is unique in that it serves as a corporate finance tool, helping business owners meet a variety of individual and corporate goals, while simultaneously furnishing employees with an additional benefit that usually costs them nothing, but gives them a very personal stake in the success of their company. - DEFINED BENEFITS PLAN
A defined benefit plan provides a specific income for retired employees, either as a lump sum or as a pension, or lifetime annuity. The pension amount usually depends on the employee's age at retirement, final salary, and the number of years on the job.
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Please note that this page provides only an overview of the different types of Tennessee employee benefits and group health insurance. The information displayed here is intended to help you request an employee benefits and group health insurance quote. Please refer to your policy for more information concerning your coverage.
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