Designing an Employee Benefit Plan
When you begin to create an employee benefit plan, you may want to start with a few core benefits, including life insurance, health insurance, and a retirement plan. These benefits form a base from which your company’s benefit plan can grow and evolve in the future. Every year or two, it may be wise to consider the addition of a new benefit to the plan, such as dental insurance or disability income insurance. Rather than bearing the entire burden of cost, you can contribute a portion of the cost, with your employees paying the balance.
Before you add a new benefit to your existing employee benefit plan, be sure to talk to your current employees to see what benefits they would like added and to which they are likely to make contributions. For example, if your employee population comprises young, single employees without dependents, a dependent life insurance plan, one that would provide a benefit in the event of the death of an employee’s spouse or qualified dependent child, would be underutilized and, most likely, unappreciated. But, if your employee population is largely made up of “30-somethings,” who are married with young children, the same dependent life insurance plan might be an ideal addition to your existing benefit plan. Remember that your employee benefit plan is not static. It must change and evolve with your company’s growth, profitability, and employee demographics in order to be effective as a retention and recruitment tool.
Most employee benefit plans are regulated by strict Federal guidelines, including continuation of coverage rules for medical insurance and rollover and distribution requirements for qualified defined benefit and defined contribution plans.
In order to avoid discrimination and liability, a benefit offered to one employee should be offered to all employees, regardless of race, age, gender, disability, and employment category. Employers must design employee benefit plans to comply with a number of Federal statutes, including the Employee Retirement Income Security Act of 1974 (ERISA), the Age Discrimination in Employment Act (ADEA), the Older Workers Benefit Protection Act (OWBPA), the Civil Rights Act (CRA), the Consolidated Omnibus Budget Reconciliation Act (COBRA), and the Equal Pay Act (EPA). While employers may offer discretionary benefits to their key employees, these benefits will be categorized as nonqualified benefits, and the cost of providing them will not be deductible for the employer, as the costs of other qualified benefits might be under the Internal Revenue Code (IRC).
Your Employees Depend on You
As an employer, you have an obligation to provide your employees with compensation in exchange for work performed on your behalf. In addition, you have the opportunity to create an employee benefit plan that will improve the morale of current employees and enhance recruitment efforts, as well as provide tax incentives for your company. A professional with experience in designing health, welfare, and pension plans can assist you in designing a plan that’s right for you and your employees and that adheres to your overall budgetary requirements