Voluntary benefits have officially crossed the threshold from add-on feature to arguably the most vital part of every benefits program.
“Voluntary benefits are now the center of the benefits strategy,” said Amy Hollis of Hollis Consulting, a benefits consulting firm in Atlanta. “They have become integral to the rewards offering as a tool to support recruiting and retention.”
The question now isn’t whether to offer these optional benefits, but which ones to put on the menu.
Financial wellness and tools to mitigate health care costs continue to top the list of popular voluntary benefits options. More than 40 percent of companies offered accident, critical illness and/or hospital indemnity benefits in 2018, and 25 percent of employees took advantage of one or more of these offerings.
Student loan repayment programs are also gaining popularity as millennials and Gen Z flood the workplace, said Mary Tavarozzi, principal of MLT Advisors in Tampa, Florida. Student loan debt in the U.S. surpassed $1.36 trillion in 2018, according to a report from Experian.
“The biggest issue these generations face is student debt,” she said. And employers are responding.
Companies that offer assistance can gain an edge with young talent, though they have to be careful about how these programs are structured. Some companies are offering a set amount per year toward debt repayment, or matching monthly funds, though Tavarozzi noted that these kinds of payments can be viewed as a bonus from a tax standpoint. “You don’t want to go afoul of the IRS,” she said. To avoid tax implications, companies such as Abbott are opting to match or exceed employees’ loan repayments through contributions to their 401(k).
Alongside financial support, pet insurance, identity theft protection and legal help are other voluntary benefits that have gained traction in recent years.
The added variety and importance of voluntary benefits, is taking its toll on in-house benefits administrators who struggle to keep up. In response, many companies are outsourcing the role, which is driving many big insurers to acquire or partner with these outsourcing firms. For example, in 2018 Transamerica partnered with Businessolver, a benefits administration platform, to add medical and voluntary benefits administration to its offering; and in 2017, Blackstone acquired Aon’s benefits administration and human resources platform for $4.8 billion. “We are also seeing smaller acquisitions almost monthly, as demand for voluntary benefits administration accelerates,” Tavarozzi said.
Make It Easy
Whether employers manage these programs in-house or through a third-party firm, the key to successful implementation is providing a variety of options that appeal to employees of all generations and needs, Hollis said.
“If you want employees to use these programs you have to tie it all together and provide seamless delivery.”
One way to increase uptake is to offer rolling adoption rather than waiting for open enrollment, Tavarozzi suggested. “This lets employers expand their offerings to meet shifting workforce needs.”
Providing live benefits counseling and self-service enrollment tools, and regularly talking about these offerings with new recruits and existing employees will also engage their interests.
“If companies want to leverage these tools to attract and retain workers, they need to talk them up and encourage participation,” Hollis said. “You need to connect the dots for these programs to drive real value.”