What are voluntary benefits?
Under a voluntary benefit program, the employer offers employees a menu of benefits; employees pay for the ones they want through payroll deduction. The benefits provider handles all administration and provides all needed education materials. Voluntary medical plans, such as critical illness insurance, have no minimum participation requirements, unlike employer-sponsored medical coverage.
Voluntary benefits include:
- Dental insurance.
- Vision insurance.
- Long-term care insurance.
- Short-term disability insurance.
- Long-term disability insurance.
- Accidental death and dismemberment insurance.
- Life insurance. Options include term life insurance, interest-sensitive whole life (variable life) and dependent life coverages.
- Supplemental health coverages, including cancer/specified disease insurance, critical care insurance and hospital indemnity plans, which pay specified flat amounts.
- Group auto and homeowners insurance.
- Nontraditional benefits, such as prepaid legal services, pet insurance and more.
Many surveys indicate that employees like voluntary benefits. However, employers should consider some issues before adding voluntary benefits:
- Does the voluntary program provide real value? Employees are likely to view a voluntary program as employer-sanctioned. If the program provides little real value, it could create a negative impression of the rest of your benefits program.
- Does the voluntary program enhance existing offerings? Voluntary insurance programs often offer a guaranteed minimum limit. This can be a real benefit for employees whose health prevents them qualifying for coverage on the individual market. For example, if your employer-provided life insurance program pays one or two times salary, employees can buy a voluntary plan as a supplement.
- Does ERISA apply? ERISA can create some compliance challenges. A truly voluntary program should not.